Apple Inc. (AAPL) iPAD Wins, iPAD Mini Rumor, iTunes Leads: GS Review

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Apple Inc. (AAPL) iPAD Wins, iPAD Mini Rumor, iTunes Leads: GS Review
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Apple Inc. (AAPL) iPAD Wins, iPAD Mini Rumor, iTunes Leads: GS Review

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Apple Inc. (NASDAQ:AAPL)’s iPad usage metrics still far above competition. Apple Inc. (NASDAQ:AAPL)’s iPad expands lead in tablet use at the expense of Amazon.com, Inc. (NASDAQ:AMZN), Android, Microsoft Surface (Apple Insider, April 18, 2013)

Summary

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IPads accounted for 81.9% of US and Canadian tablet web traffic in March, up from 80.5% in February. According to a report by online advertiser Chitika, traffic was essentially flat or slightly lower for competing tablets such as Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle Fire, Samsung’s Galaxy Tab, Google’s Nexus tablet, and Microsoft’s Surface. This reversed the trend from December to February, during which Apple’s share had dipped. Chitika noted that iPad growth “may be partially due to Apple offering refurbished iPads at a discount beginning in mid-March, 2013.”

Goldman’s take

While these types of usage metrics have not been a reliable indicator of short term shipment or market share trends, Goldman believes the gap between usage and market share suggests that Apple’s installed base remains the most engaged and active in the mobility space. The strength of Apple’s installed base continues to be critical for any potential recovery in its profit growth and the long-term investment case for the stock, and factors such as relative usage rates provide some positive news in this respect.

Supposed Apple ‘iPad 5’ rear casing again shows mini-like design

Supposed Apple ‘iPad 5’ rear casing again shows mini-like design (Apple Insider, April 22, 2012)

Summary

Apple Insider reports that the next-generation iPad may have an iPad minilike design, according to pictures said to be leaked by tech blog Tactus. The report said that the iPad will continue to sport a 9.7-in screen, with thinner bezels, and may be powered by an A7X chip.

Goldman’s take

Goldman expects a refresh of the iPad family in the fall, as Goldman believes the company made it fairly clear on its last earnings call that we should not anticipate major product refreshes in the June/July period. Goldman now forecasts 82.3 million iPad shipments for calendar 2013. A refresh of the traditional iPad is important in that it could allow some of Apple Inc. (NASDAQ:AAPL)’s overall iPad mix to shift away from the fast-growing iPad mini; this would be a welcome positive for overall margin and ASP trends.

ITunes has a wide lead in online video-on-demand and sales

NPD: iTunes crushing competition in both Video on Demand and sales (Electronista, April 23, 2013)

Summary

Apple Inc. (NASDAQ:AAPL)’s iTunes Store is the dominant marketplace for video digital downloads, according to an analysis by the NPD Group. It found that in 2012, iTunes had 67% share of television show purchases and 65% of movie sales, up slightly from 2011. The Xbox Video store and Amazon Instant Video came in distant second and third places. NPD also notes that recent gains by Amazon.com, Inc. (NASDAQ:AMZN) have come at the expense of other competitors, not iTunes. Apple also leads in Internet Video On Demand, where it had 45% share of online video rentals. In this category, Amazon and Vudu come in distant second and third places.

Goldman’s take

Apple Inc. (NASDAQ:AAPL) appears to have leveraged its success with digital music downloads into video as well, as this is not the first report of its strong share of online video rentals and sales. With iTunes, software and services revenues passing a $16 billion run rate as of last quarter, and management indicating that it will increasingly focus on this as a profit center,  Apple Inc. (NASDAQ:AAPL) could see expanding recurring profit streams from content sales. Although these reports omit “all-you-can-eat” streaming services such as Netflix, the results still provide an indication of iTunes’s strength.

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