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Is an iPad Surprise in Store for Apple?

By Evan Niu, CFA - Apr 5, 2013 at 10:00PM

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Investors keep fretting over a possible iPhone miss this quarter, but what about strength in iPad units?

Investors should be preparing for a possible Apple (AAPL 4.01%) miss this quarter relative to Street forecasts. iPhone unit sales are expected to post a sequential decline coming off the holiday quarter, and investors remain primarily focused on that device as the big money maker. iPhones were 56% of sales last quarter, so this investor emphasis isn't misplaced by any means.

Still, aren't investors forgetting about the iPad?

Survey says
Cowen & Co. analyst Matthew Hoffman thinks so, reiterating an "outperform" rating today on the iPad maker. The analyst recently commissioned a survey of U.S. households with a sample size of over 1,000 respondents. Of those, 40% of households owned an iPad, which was broken down into 35% owning the full-sized version and 5% owning the iPad Mini.

Hoffman views the figure as evidence that the U.S. tablet market remains underpenetrated relative to the more mature PC and smartphone markets. The iPad just had its third birthday, and has a long way to go on the adoption curve.

Apple updated its iPad line at the very end of last year, including the addition of the iPad Mini that's seeing strong sales due to pent-up demand for smaller form factors. In fact, last quarter iPad unit sales were remarkably robust at 22.9 million, but the strength there didn't offset investor disappointment regarding iPhone units.

The survey also showed that 41% of respondents were intending to purchase an iPad of some sort in the near future. That was a mild downtick from the 43% response from October, but still shows that there's still plenty of incoming demand for Apple's tablet.

Rivals are starting to chip away at Apple's market share lead, but the tablet market is growing so quickly that Apple's still putting up envious unit growth.

I've said it before and I'll say it again: No one appreciates the iPad.

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