Apple Set To Dramatically Boost iPad 2 Shipments In Quarter

Appleinsider.com is reporting that the company is set to dramatically increase its shipments of iPad 2's in the coming quarter. Shipments of between 12 and 14 million iPad 2 units are anticipated to come in the third quarter of 2011, which compares to 7 to 9 million units in the second calendar quarter. The company is said to be piling up inventory of components like touchscreen panels in order to minimize the possibility of shortages. The ramp up is expected to benefit Apple's AAPL upstream component suppliers such as LG Display, Catcher Technology, TPK Holdings, and Radient Opto-Electronics. If the 14 million number is correct, it would be nearly three times greater than the 4.69 million iPad 2's the company shipped in the March quarter. When the device originally began shipping in March, the company was hit by supply disruptions amid overwhelming demand from consumers, a predicament that COO Tim Cook described as the "mother of all backlogs." The company appears confident, however, that it can avert another similar scenario and Apple's consumption of tablet components right now is said to be so large that it may potentially hurt competitors looking to enter the market with their own tablet devices.

ACTION ITEMS

Bullish View:

• According to reports coming from Apple's suppliers in Asia, the company is ramping up its iPad 2 shipments in a major way, which could stoke investor appetite for the shares, which have been under some pressure in recent months.


• Apple's iPad 2 is so successful that it may be pushing competitors out of the market as a result of their inability to get parts for tablet devices because of Apple demand. This is a very interesting, and potentially overlooked, competitive advantage for the company.


• Apple continues to trade at a relatively inexpensive valuation - 11.60 times forward earnings and a PEG ratio of 0.63. The stock is not expensive on a valuation basis.

Bearish View:

• Will the company be able to avoid another rendition of supply constraints?


• The overall tenor of this news is bullish for Apple, but bearish for competitors such as Motorola Mobility MMI, Google GOOG, and their Android tablets, and Research in Motion RIMM, the maker of the PlayBook.