The iPad Pro Launch Doesn’t Make Apple Stock Any More Investment-Worthy

Good news for consumers who’ve been anxiously awaiting the launch of the iPad Pro — Apple (AAPL) will be taking online orders for the device beginning on Wednesday of this week. Shipping should begin by the end of the week or the beginning of next week (depending on which rumor consumers care to believe), and presumably, the iPad Pro should be available in stores shortly after that.

The iPad Pro Launch Doesn't Make Apple Stock Any More Investment-Worthy

Source: Apple

The $64,000 question most every current and would-be owner of Apple stock is asking: Will this be the device to reinvigorate the company’s slowing tablet sales?

Unfortunately, as impressive as the device is, not even Apple is feeling terribly confident that the iPad Pro is going to make major waves.

The iPad Pro Is a Beast…

Giving credit where it’s due, the soon-to-launch iPad Pro is arguably one of the first tablets that fully bridges the gap between a tablet and a computer without asking users to sacrifice something and/or without forcing them to pay an arm and a leg to enjoy the best of both worlds.

The low-end iPad Pro sports a price tag of $799 and only comes with 32 gigabytes of onboard storage and Wi-Fi connectivity. At the other end of the scale is a $1,079 device that boasts 128 gigabytes of storage and works with a Wi-Fi or a cellular connection.

All variations are the same 12.9-inch (diagonal) screen, and all come with an A9X processor, which operates at a robust 1.8 GHz … in line with contemporary lower-end desktop and Mac speeds, but still plenty fast enough to meet most reasonable needs.

All versions of the iPad Pro will also work with a keyboard and specially designed stylus too, but for a price. The keyboard costs a questionable $169, while the stylus — a surprisingly advanced device — is priced at a reasonable (considering what it does) $99 apiece.

While still pushing the limits of affordability for most consumers, the iPad Pro isn’t intended for most consumers. It’s aimed at business users, and mostly needs to compete well with the Microsoft (MSFT) Surface Pro 4, which launched last month.

Size-wise, the Surface Pro 4 offers a comparable 12.3-inch screen, a keyboard and a stylus, not unlike the iPad Pro.

Where the Surface Pro 4 really differentiates itself from the iPad Pro, though, is in the size of its hard drive and the subsequent price. The Surface Pro 4 comes with drives ranging from 128 gigabytes to as much as one terabyte, though the biggest drive imposes a $2,700 price tag.

The lower-end Pro 4 tablets costs $899 with a modest M3 processor and minimal memory, with the price tag getting progressively higher as memory and speed are added. The dual core M3 is reported to operate at 2.7 GHz, though that theoretical figure may be hampered by other hardware bottlenecks.

In other words, dollar for dollar, performance and functionality don’t favor the iPad Pro over the new Surface Pro, and vice versa. The core of the decision should ultimately rest on a preference for Windows 10 or iOS.

… But Investors Need Not Get Their Hopes Up

The iPad Pro will almost certainly see measurable sales. It’s unlikely to be a game-changer for AAPL shares, though … and not even Apple thinks so. Sources say the company has only ordered 2.5 million iPad Pro units for 2015, and is taking a “wait and see” approach for next year’s orders.

For perspective, Apple sold 9.88 million iPad last quarter, and sold 21.42 million iPads in the holiday quarter of last year.

Historically, the fourth calendar quarter of the year is a big one for the iPad, as it’s a popular gift. The business-oriented iPad Pro, however, is not an affordable “gift” for ordinary consumers when the other high-end iPads adequately serve their primary purpose, which is playing games and checking Facebook.

And, even if Apple were to handily sell all 2.5 million units, that’s only revenue of about $2.5 billion. That’s a pittance relative to the $74.6 billion in sales Apple drove in the fourth calendar quarter of 2014.

Bottom Line

A down-the-road kind of product that could take off once proven during the remainder of the year? Apple stock owners may not want to get those hopes up either.

Once Apple plays that card (after Microsoft already has) and the cat’s out of the bag — and copycat alternatives surface — it’s going to get tougher rather than easier for Apple to push the new iPad Pro.

Its best response is going to be the knee-jerk response, yet Apple itself has already sent a message that it’s not expecting much.

Investors would be wise to take that hint.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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