Market watchers expect $329 iPad mini will justify its price to consumers

Posted:
in AAPL Investors edited January 2014
Though the starting price of the iPad mini is higher than many had expected, Wall Street analysts believe the storage capacity and build quality offered by Apple will be more than enough to court consumers and make the product a success.

Though Apple stock fell after Tuesday's iPad mini announcement with a $329 starting price, analysts are largely sticking by their price targets for AAPL stock. Chris Whitmore of Deutsche Bank said pricing of the iPad mini was a "modest disappointment," but he still expects the product to perform well.

Whitmore said the features of the iPad mini are greater than he expected, particularly capacity. He and others assumed Apple would offer an 8-gigabyte entry-level model to reach a lower price point, but the starting capacity for the iPad mini is 16 gigabytes.

iPad mini


He also said the build quality of the iPad mini "looks and feels outstanding," which will justify the premium pricing of the iPad mini over competitors like the Amazon Kindle Fire HD and Google Nexus 7.

"Due to the high quality of the hardware, we expect the device will be very well received by consumers once they have an opportunity to test it," Whitmore said. Deutsche Bank has reiterated its price target of $850 for AAPL stock.

Charlie Wolf with Needham & Company expects the iPad mini will expand the tablet market and also make it difficult for competitors in the smaller, less expensive market segment.

"Starting at $329, Apple left a modest price umbrella for competing 7-inch tablets," he said. "However, none compare with this device, in our opinion, which is a fully featured iPad except for its size. All 275,000 iPad applications can run on it without modification."

Wolf admitted that the iPad mini may cannibalize some sales of the full-size iPad, but he expects it to greatly expand the market for iPads. Needham & Company continues to recommend that investors buy AAPL stock with a price target of $750.

iPad mini


Canaccord Genuity's Michael Walkley also believes Apple's pricing of the iPad mini will allow the company to maintain dominant market share of the growing tablet market. He said Apple provides better hardware along with a more integrated and robust user experience than competing, lower priced tablets.

Shaw Wu of Sterne Agee originally predicted that the iPad mini would be priced between $299 and $349, so he wasn't fazed by the $329 price. He noted that Apple has a strong track record of optimizing volume and profits, unlike most competitors who need to price low to compete in the market.

"We continue to believe iPad mini is the competition's worst nightmare and likely to drive incremental volume," he said.

iPad mini


Rob Cihra of Evercore Partners still believes Apple will eventually phase out the iPad 2, as he sees less of a market for it with a $329 iPad mini available. He also believes the iPad mini will help Apple capture and even larger share of the tablet market, and he has reiterated an "overweight" rating for AAPL stock with $800 price target.

Morgan Stanley's Katy Huberty compared the iPad mini to the iPod mini, as both products launched roughly two-and-a-half years after the debut of the original model and with about a 17 percent discount.

"In other words, Apple has experience extending a product line to a smaller, cheaper form factor," she wrote. "In the case of iPod mini in 2004, total iPod shipment growth accelerated to 469% (year over year) in the year following the launch vs. 212% (last 12 months') growth."

Brian White with Topeka Capital Markets called the iPad mini an "absolute homerun for Apple." He was at Tuesday's event and had hands-on time with the device, and came away impressed.

"It felt every bit as good in our hand as we had expected, especially with the more refined aluminum casing that includes the colors of the iPhone 5 (i.e., black and slate and white and silver)," White wrote. "The device comfortably fits in one hand and can be carried in our sport coat pocket."

Maynard Um of Wells Fargo Securities believes that Apple arguably has its strongest product lineup in the company's history. He expects Apple to take a bigger portion of the consumer wallet while its products will cause customers to delay purchases of other consumer electronics items such as PCs.

Finally, Gene Munster with Piper Jaffray said the iPad mini has given him greater confidence that the iPad will be a bigger part of Apple's story moving forward. He believes the device's main feature is price, followed by its size.

"While some investors may claim this is a departure from innovating on technology for Apple, we believe it is how Apple furthers markets in which it is dominant, using the iPod as a historical precedent," he said.
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Comments

  • Reply 1 of 77
    allenbfallenbf Posts: 993member
    Can't wait to hold one of these and see how light it is. Mildly disappointed in price, but I'm sure Apple knows more about their margins than I do ;-)
  • Reply 2 of 77
    rogifanrogifan Posts: 10,669member
    Apple should have pitched this differently. They should have pitched this as a smaller form factor iPad that has all the capabilities of its big brother but with a thinner and lighter design and more affordable price. By bringing up the Nexus in the keynote they inevitably brought in the comparisons to cheaper tablets. And of course then the biggest focus will be on price.
  • Reply 3 of 77
    rogifanrogifan Posts: 10,669member
    Oh and th stock is up $10 so far today, so this meme that the stock dropped $20 yesterday because of the iPad mini price is mostly bunk.
  • Reply 4 of 77
    I was a little put off by the price until I realized that I was succumbing to Techie Boi Syndrome, a condition marked by a stringent belief that all tech products are made for me alone and should conform to that, otherwise be subjected to bib-dribbling and endless clichés such as "EPIC FAIL" and company X being "FTW."

    While $330 is nothing to sneeze at, there might just be a large swath of consumers who want an iPad but not the 10-inch version, seeing the mini as the product they want. This is something incomprehensible to techie boyz, who are more concerned with sepcs and a weird compulsion to have *both* products, or at least give the impression that they do (i.e., one for every room in the house because that's how they spend their money. Other people aren't like that and will never be.)
  • Reply 5 of 77
    irelandireland Posts: 17,584member

    Quote:

    Originally Posted by allenbf View Post



    Can't wait to hold one of these and see how light it is.


     


    It's half the weight of an iPad.

  • Reply 6 of 77
    I can't imagine how anybody would be disappointed by the price.
  • Reply 7 of 77
    irelandireland Posts: 17,584member

    Quote:

    Originally Posted by Rogifan View Post



    Apple should have pitched this differently. They should have pitched this as a smaller form factor iPad that has all the capabilities of its big brother but with a thinner and lighter design and more affordable price. By bringing up the Nexus in the keynote they inevitably brought in the comparisons to cheaper tablets. And of course then the biggest focus will be on price.


     


    You're presuming consumers see 'cheaper' and always go for that, when if history is any indicator the opposite is true. Apple makes premium products and this fits perfectly in line with that.

  • Reply 8 of 77
    irelandireland Posts: 17,584member

    Quote:

    Originally Posted by Rogifan View Post



    Oh and th stock is up $10 so far today, so this meme that the stock dropped $20 yesterday because of the iPad mini price is mostly bunk.


     


    Apple's stock nearly always goes down on or after a keynote, the products announced are completely irrelevant when most, if not all analysts have no clue what's going on, and the amount of corruption and manipulation is the stock market game is astounding IMO. Especially with regards AAPL.

  • Reply 9 of 77

    Quote:

    Originally Posted by Elian Gonzalez View Post



    While $330 is nothing to sneeze at, there might just be a large swath of consumers who want an iPad but not the 10-inch version, seeing the mini as the product they want. 


     


    But see that's what's a little concerning for investors, Apple doesn't make as much money on the mini as it does the full size. What's the long term path forward here? If the full size is selling like gangbusters what's the real need for the mini at all? Is it an acknowledgement that the market at 100 million sold is getting saturated so a new category makes sense or is it a bit of a hurried reaction to competition? Or does Apple kind of expect the mini to be more niche where the impact on the full size won't be major....questions questions...

  • Reply 10 of 77
    The Mini is, in many ways, the same machine as an iPad 2 so, for me, the easiest way to think about the Mini is to think about whether the iPad 2 is well priced and if a $70 price reduction is appropriate/attractive. For what it's worth, I think the iPad2 is well priced (in fact, I like the iPad 2 more than 3rd gen). And so the Mini is fairly priced.

    I like the iPad 2 because, although the specs are slightly dated, I find that the iPad2 still zips along on iOS6. Other than wishing Apple had added Siri (clearly the 2 is capable of handling or the Mini could not - unless it's a microphone issue), I couldn't be happier with my 2 and imagine a Mini would also be satisfying.

    I also had some more detailed thoughts on how to guide friends and family when they ask whether or not to buy the Mini. http://q10a1.blogspot.com/2012/10/ipad-mini.html
  • Reply 11 of 77
    irelandireland Posts: 17,584member

    Quote:

    Originally Posted by thataveragejoe View Post


     


    Is it an acknowledgement that the market at 100 million sold is getting saturated so a new category makes sense or is it a bit of a hurried reaction to competition?



     


    Saturated, lol. This is just the beginning.

  • Reply 12 of 77

    Quote:

    Originally Posted by Elian Gonzalez View Post



    I was a little put off by the price until I realized that I was succumbing to Techie Boi Syndrome, a condition marked by a stringent belief that all tech products are made for me alone and should conform to that, otherwise be subjected to bib-dribbling and endless clichés such as "EPIC FAIL" and company X being "FTW."

    While $330 is nothing to sneeze at, there might just be a large swath of consumers who want an iPad but not the 10-inch version, seeing the mini as the product they want. This is something incomprehensible to techie boyz, who are more concerned with sepcs and a weird compulsion to have *both* products, or at least give the impression that they do (i.e., one for every room in the house because that's how they spend their money. Other people aren't like that and will never be.)




    You know what the price of a carton of cigarettes is in NYC?  About $110.  I know people that go through a carton a month.  And for what reason?  To ruin their lungs.  Cost is a relative thing.  There are plenty consumers that don't just flip burgers for a living.  I'm sure pro athletes and drug lords won't question the price of an iPad Mini.

  • Reply 13 of 77
    irelandireland Posts: 17,584member

    Quote:

    Originally Posted by rare comment View Post



    It's $70 less than the iPad 2 so, for me, the easiest way to think about this is whether the iPad 2 is well priced or not; they are, in many ways, the same machine. For what it's worth, I think the iPad2 is well priced (in fact, I like the iPad 2 more than 3rd gen).


     


    Please explain. I've owned all iPhones, all iPads and a lot of Macs, a car, a motorbike, bikes, toys, board games, consoles and other stuff and I can say with my hand on my heart the iPad 3rd gen is the best product I've ever owned. The screen is what makes it for me. I'm still in awe of it 6 months on. It's one of the few products I've owned that I like as much now as I did on day one. And despite the resolution, my concern with it being more sluggish than iPad 2 as a result were unfounded, thankfully :-)

  • Reply 14 of 77
    irelandireland Posts: 17,584member

    Quote:

    Originally Posted by Constable Odo View Post




    You know what the price of a carton of cigarettes is in NYC?  About $110.  I know people that go through a carton a month.  And for what reason?  To ruin their lungs.  Cost is a relative thing.  There are plenty consumers that don't just flip burgers for a living.  I'm sure pro athletes and drug lords won't question the price of an iPad Mini.



     


    I can't say that's the most compelling argument I've ever heard.

  • Reply 15 of 77
    But see that's what's a little concerning for investors, Apple doesn't make as much money on the mini as it does the full size. What's the long term path forward here? If the full size is selling like gangbusters what's the real need for the mini at all? Is it an acknowledgement that the market at 100 million sold is getting saturated so a new category makes sense or is it a bit of a hurried reaction to competition? Or does Apple kind of expect the mini to be more niche where the impact on the full size won't be major....questions questions...

    Why does this have to be an "either / or" product? I believe that there will be many consumers that buy both, or for that matter, several...
  • Reply 16 of 77
    jungmarkjungmark Posts: 6,687member

    Quote:

    Originally Posted by thataveragejoe View Post


     


    But see that's what's a little concerning for investors, Apple doesn't make as much money on the mini as it does the full size. What's the long term path forward here? If the full size is selling like gangbusters what's the real need for the mini at all? Is it an acknowledgement that the market at 100 million sold is getting saturated so a new category makes sense or is it a bit of a hurried reaction to competition? Or does Apple kind of expect the mini to be more niche where the impact on the full size won't be major....questions questions...



    Apple doesn't "react" to competition. Despite what tech blogs like us to think, the 10" iPad is by far the most popular size/tablet out there. What Apple doesn't want is to leave a hole in its product portfolio. If you are thinking of spending $300 on a 7" tablet, for $30 more you can get a 8" tablet and have access to 250,000 iPad specific apps in addition to the "regular" iOS apps.

  • Reply 17 of 77


    I think it's priced a little high.  Oh well.

  • Reply 18 of 77
    tundraboytundraboy Posts: 1,613member


    The analysts complaining about the price are all demand side in their mindset.  Seems to me, Apple picked a 'disappointingly' high price because of supply constraints.  What's the point of setting a lower price if you can't produce enough widgets to satisfy demand at that price?  It's either that or Apple is run by incredible morons who like leaving money on the table.

  • Reply 19 of 77
    mjtomlinmjtomlin Posts: 1,854member

    Quote:

    Originally Posted by allenbf View Post



    Can't wait to hold one of these and see how light it is. Mildly disappointed in price, but I'm sure Apple knows more about their margins than I do ;-)


     


    Not sure why people are disappointed over the price of this thing? It's basically a shrunk down 3rd generation iPad... The price dropped $170 just by changing the size and display.


     


    Are people assuming this is just an iPad 2? They need to look at the specs on Apple's page... http://www.apple.com/ipad/compare/

  • Reply 20 of 77
    vqrovqro Posts: 66member


    I think they needed to price it at $299.  If they were to sell 10 Million of these, they're down $300 Million but they knock the competition out of the water and lock 10 million consumers into the ecosystem.  These 10 million are nearly guaranteed to buy the next iteration.  Short term loss for a lock of the market.  They should have done it.

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