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iPad 2 Supply Issues May Hurt Apple Stock

Apple Inc. ipad 2Since hitting the market on Mar. 11, the Apple (NASDAQ: AAPL) iPad 2 has sold out two shipments in the United States, according to the latest Apple stock news. For an Apple device t seen as an upgrade rather than a bold reinvention of the popular tablet PC, that hype is especially promising for AAPL stock. Much as they were following the original Apple iPad debut in the second quarter of 2010, the analysts are now setting new, almost absurdly high target prices for AAPL stock.

In a Thursday note to investors, Kulbinder Garcha of Credit Suisse set Apple’s target price at $500, predicting earnings growth of 46% and revenue growth of 50% by 2013. The tablet market alone will bring in $34 billion for Apple by 2012 by Garcha’s estimations.

Provided the fledgling Google (NASDAQ: GOOG) Android tablets like the Motorola (NYSE: MMI) Xoom and Samsung’s Galaxy fail to make inroads against the iPad, Garcha’s predictions are likely to come to pass. However, that growth may be on a longer timeline than expected. It’s more likely that supply constraints will limit the iPad 2’s earning potential much in the same they did for the iPad last year.

The sellouts of both the Mar. 11 and Mar. 15 shipments of the iPad 2 have already called into question the tablet’s international launch coming on Mar. 25. Releasing a new product in more than 25 countries inside of a month is already guaranteed to strain availability, but the ongoing crisis in Japan is only going to further limit iPad 2 availability. As John Paczkowski pointed out in a Friday report at All Things Digital, there are five components in the iPad 2 that are manufactured in Japan.

While two of them can be purchased from other manufacturers, the battery, glass for the touch screen and compass are exclusively made in Japan. Asahi Glass, the likely manufacturer of the overlay, saw two facilities damaged in the earthquake. The facilities of Apple Japan and AKM Semiconductor, the producers of the battery and compass respectively, weren’t hurt in the quake. But shipping issues and power shortages could plague both.

The original iPad suffered supply constraints for almost six months after its release, a period when the device generated around $5 billion in total revenue. While the tablet market continues to grow by leaps and bounds, the supply issues surrounding the iPad 2 are already threatening to limit its potential to outstrip its predecessor. Apple may hit $500 and the iPad may generate $34 billion all on its own. Not by 2012 though.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.


Article printed from InvestorPlace Media, https://investorplace.com/2011/03/apple-ipad-2-supply-chain-aapl-stock/.

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