Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), Google Inc (GOOG): The Market is Seriously Underestimating the iPad

From Tim Cook during Goldman Sachs’ Technology and Internet conference:

“You can go in and accept a lower margin on any product for a strategic reason. That strategic reason might be our entry into that area. At the background, we always know that this halo effect play, we had confidence in our ability to execute the supply chain and walk down costs. In the area of tablets, we think the market is huge and it makes sense to have another product there. People wanted a full iPad experience, but in something smaller and lighter. We have other ways to make money and reward shareholders.”

The iPad Mini is Apple´s way to make sure that it won´t get displaced by the competition due to pricing. I wouldn’t be surprised to see the company reducing the price of the current iPad Mini once a new version is launched, or even developing cheaper versions too. This is about long-term growth, not short-term profits.

Bottom Line

The iPad has lower margins than the iPhone, but it’s a high-growth product with remarkable competitive strength and exciting prospects over the next years. Besides, profitability tends to increase with higher production levels. Considering all the talk about lackluster growth prospects for Apple Inc. (NASDAQ:AAPL), it looks like Wall Street may be seriously underestimating the iPad.

The article The Market is Seriously Underestimating the iPad originally appeared on Fool.com.

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