The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- A few weeks back, we noted that while
products continue to see huge demand, a key concern for the company is management of supply-related constraints. The recent Japanese earthquake has now added to these concerns. According to market research firm iSuppli, the earthquake may cause logistical disruptions and supply shortages for the newly launched iPad 2. Although Apple remains king of the tablet market, it is expected to face a growing set of challengers in 2011 from
Research in Motion
We maintain a $420 price estimate for Apple stock, roughly 25% above market price.
Apple recently released the iPad 2 and saw strong first weekend sales (an estimated 400,000 to 500,000 units). We estimate that Apple will sell about 24 million iPads in 2011.
According to a recent report from DisplaySearch, the total tablet market could reach 60 million units in 2011, with the majority of sales coming from Apple. While our forecast remains conservative compared to this estimate, we believe that potential supply constraints could push the realized total sales volume towards our 24 million unit estimate.
We've previously discussed these supply constraints in
noting that management actually highlighted such issues as the main bottlenecks to meet the huge demand for its products.
So how does the earthquake in Japan change the equation? According to iSuppli's report, about five Japanese suppliers provide raw materials for the iPad 2. These materials inclue NAND flash memory, DRAM, electronic compass, touch screen overlay glass and the system battery. These are critical components for the iPad 2, and disruptions to their supply would likely hinder iPad sales.
Potential Impact on Our Apple Stock Price Estimate
Although supply constraints are a major concern for Apple, these particular issues arising from the Japanese earthquake could be more short-term and unlikely to alter our long-term projections. As we have already factored in the supply-related constraints in our base case forecasts, we see no material shift to our estimates. Moreover, the iPad constitutes only 7% of our $420 price estimate for Apple, meaning that any significant change to our unit sales forecasts would have a limited impact on our price estimate.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.