The investment banking giant Goldman Sachs is known for its constantly updated Conviction Buy and Conviction Sell list detailing its top picks for both companies and their stocks expected to do well and those expected to flounder in the next 12 months. What we rarely see is a research statement released regarding the release of a single product on behalf of Goldman. However, that’s precisely what Goldman Sachs has done – released a detailed summary, expectations, and company implications for the coming year of Apple’s newly released iPad.
Goldman’s first order of business was to revise their price-target and valuation for Apple’s EPS(Earnings Per Share) from $11.36 to $12.35 for 2010 and from $12.50 to $14.30 for 2011. Having altered this figure, Goldman added they believe the initial impact on Apple’s stock price to be “muted” with the majority of volatility occurring prior to the launch in line with bullish investor sentiment. Adding to the company’s financials estimates the investment bank said they expect Apple to sell six million iPads during the 2010 calendar year. A figure that may be well on track considering Apple sold 120,000 units in the first day of sales with another million on production by late April.
Other complementary industries are slated to do well according to Goldman including AT&T who is the only service provider who offers 3G service to the iPad and Amazon.com whom Goldman stated, “We believe that Amazon’s share price reaction (+3%) to Apple’s iPad launch reflects investor relief that a “worst case” scenario (where Apple launched a highly-competitive e-book store) did not materialize. Apple’s iBooks Store includes electronic book relationships with Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, with content availability and pricing to follow. Apple also stated that current iPod Touch/iPhone apps will be compatible with the iPad, alongside new applications specifically developed for the device.”
Goldman defends the fact that the iPad should not cannibalize its own smartphone, the iPhone. Many claim that the iPad is only a plus sized iPhone, Goldman weighs in on the issue saying : “We do not view the iPad as directly competitive with smartphones but rather as occupying a separate area between laptops and smartphones. This is because consumers will still need to carry a handset for making calls, and the iPad’s form factor is too big to fit in a purse or pocket and, at this point, lack phone features. Moreover, the fact that it will have a WiFi-only version (no cellular connectivity) suggests it is not meant as a smartphone replacement.”
Regardless of Goldman Sachs estimates and implications for the iPad it’s hard not to hear about its initial successes earning Apple an estimated $75 million in revenues in just the first day of sales.