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Why Apple Could See Further Gains this Week -- and Beyond

There was one Apple (Nasdaq: AAPL  ) storyline dominating the headline today: the company's decision to initiate a 1.8% dividend. As far as I'm concerned, that's just a conservative launching point to more capital returns from Apple.

If the company ends up returning only the $45 billion to shareholders by the end of 2014 that it announced today, Apple's cash hoard will continue to swell, possibly to about $150 billion by the end of 2012, and would end up being larger than Microsoft's (Nasdaq: MSFT  ) entire current market cap by the end of 2014! Simply put, if Apple keeps executing, they'll either have to either aggressively buy back shares, increase their dividend, or offer a massive one-time dividend to shareholders.

However, while Apple's dividend was the focus of most media attention today, a piece of news that could be even more interesting came was announced after the bell today. Head of marketing Phil Schiller revealed that Apple had sold over 3 million iPads since its introduction last Friday. Considering that the first iPad took 28 days to hit just its first million units, that shows just how far the iPad has come.

The news hasn't notably pushed Apple's shares higher after the bell, even though it surpasses even the most bullish analyst expectations. That muted reaction is surprising and could have to do with the lack of a comparable weekend off of which for investors to base the iPad's success. Apple never announced sales figures for the iPad 2's launch weekend. Also, the press release didn't explicitly break down how orders in the week-long (and backlogged) pre-order were handled, which, for the time being at least, adds another layer of uncertainty how strong the launch was, relative to past Apple products.

Still, as analysts digest this news, you'd have to expect a cavalcade of upping quarterly expectations. Projecting Apple's sales on products where a product launch is expected can be tricky. Look no further than how everyone whiffed on iPhone sales last fall only to then underestimate demand during the holiday quarter, but the huge iPad launch weekend points toward Apple crushing expectations even if consumers held off buying the tablets during January and February as they waited for the expected new iPad launch in March.

Longer-term -- and that's the time frame we invest in at the Fool -- the strength of this launch shows that the iPad's momentum continues to be underestimated, even with Apple's market cap near $560 billion. Keep in mind that the opening weekend was restricted to larger developed markets like the United States, Japan, Western Europe, and Australia. Next weekend the iPad will hit a number of smaller markets that, combined, add up to another large launch possibility. Then there's an eventual release into growth markets like China and Brazil, where Apple's seen its highest recent growth rates. Even at 3 million sales in a weekend, those iPad sales don't count what will come from some of Apple's most important markets.

Long story short, as investors come to terms with the staggering popularity of the newest iPad, it becomes clear just how much momentum the product has ahead of it this year. The newest iPad is bigger than just about anyone thought. Now the fun part is to sit back on your couch and pop some popcorn to watch all of the analysts race to update their models in the coming weeks.

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Eric Bleeker owns shares of no company listed above. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and Apple; creating a bull call spread position in Apple; and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On March 20, 2012, at 12:24 PM, Cgrant3809 wrote:

    Would love to see a discussion on the stock surges/pauses thats happening right at the $50 marks over the last 6 months. When the stock hit $400 in October, it fell back due to the weak quarterly earnings report, but has happening at a hyper pace in 12 as the stock keeps breaking through those barriers.

    It hit $450 in January right after the last quarterly earnings (4 days steady). Hit $500 (502, 509) in early February (3 days steady). A $545 resistance in early March (6 days steady). A $600 resistance in mid-march (4+ days steady).

    Im curious because as AAPL keeps getting press as a cultural icon, never slowing down, economic powerhouse (continue superlatives) in the style, tech, AND money blogs and news centers, I'm wondering if these breakpoints are based on more societal forces of people being afraid to break the barrier. Which might be an explanation why the news about 3M iPads didnt budge the stock 'yet' (wait til the end of the week).

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