Needham & Company
Wolf has taken a long-view with the iPad, noting that the iPod and iPhone both got off to relatively slow starts before they experienced explosive growth. But the iPad has an advantage, he said, due to its access to more than 140,000 applications on the App Store.
Because Apple is defining a new category of devices, sales of the iPad are likely to ramp slowly," Wolf said. "But the $500 starting price point is low enough to attract a sizable portion of the early adopter crowd, consisting of iPhone and iPod owners.
"It's noteworthy that the iPad's initial price is below the iPhone's initial price and not much higher than the price of the first iPod, introduced in 2001. Our best guess at this time is the Apple could sell four million iPads in its initial year on the market, which translates into at least $2 billion of revenue."
Initial plans are for the iPad to only be sold through Apple's online and retail stores. However, Wolf said he would expect the device to see wider availability in the future.
Analyst Yair Reiner noted that although the iPad was revealed in a presentation that lasted over an hour, its true use and potential will take some time to be realized.
"It won't happen overnight," he said, "but in time, we believe that what looks today like a big iPhone or amputated netbook or a souped-up photo frame will be revealed as a revolutionary new media device."
He noted that copycat devices will inevitably crop up, but Apple's advantage lies in the iTunes ecosystem. Competitors will have a hard time replicating the 125 million active iTunes accounts with credit cards that Apple has in its camp.
Reiner has included sales of 1.1 million iPad units in the first year in his projections, a total he said is conservative. For the second year, he has forecast 4 million, while checks with suppliers indicate Apple is prepared to ship 10 million units.
Oppenheimer has increased its price target for AAPL stock to $265, from $255.
Analyst Brian Marshall said he believes Apple "surpassed expectations" with the iPad reveal. He had initially forecast 2.2 million shipments in the first year, but said he now believes "an order of magnitude higher number is likely more accurate."
Marshall did a breakdown of hardware costs for the device, and believes the $499 model would cost Apple $290.50 in to manufacture. The high-end $829 model has an estimated component cost of $383, resulting in a gross margin of 54.4 percent.
With margins that high, Marshall said Apple could add as much as $1.34, or 11.2 percent, to its earnings per share with sales of 7 million iPads at a $628 average selling price. The average gross margin of 48 percent would add $4.4 billion in revenue, or $1.3 billion in net income.
Marshall said he did not fully appreciate the iPad until he had a hands-on demo with it.
"While we were impressed with the specs during the briefing given by Mr. Jobs, it was not until we actually used the iPad for ~15 minutes we were convinced this will be another grand slam product for AAPL," he said. "The ergonomics and 'media' experience of the device (i.e. Internet browsing, e-reading and watching videos on the 9.7" screen) stood out the most to us."
Caris & Company
Buy, don't sell, on the news, is the recommendation of analyst Robert Cihra. Like all other analysts, he believes the iPad will be a success, based on Apple's ability to leverage the unique in-house core abilities ranging from hardware and software engineering to the existing iTunes ecosystem.
"We believe investors should be buying AAPL share, not 'selling the news,' with consensus numbers too low and valuation quite compelling," Cihra said.
He noted that Apple doesn't do cheap, it does different, and the $499 competitive price of the iPad will be a strength to kickstart the platform. He also has high expectations for the iBooks app and its accompanying iBookstore.
"Taking a page out of its own playbook, we see no reason why the new iPad+iBookstore can't do for print media what iPod+iTunes did for music," he said, "while we think gaming also holds potential as a long-term homerun."