The iPad Mini: A Cannibal No More?
Contrary to analysts’ fears, Apple’s (NASDAQ:AAPL) iPad mini sales aren’t cannibalizing fourth-generation, full-size iPad sales to the extent that had been expected. While Cowen and Co. determined last month that iPad mini “creates more demand than it cannibalizes,” a survey conducted by Morgan Stanley and AlphaWise provided even more definitive evidence that concerns over this trend were exaggerated.
Has the iPad Mini Helped Grow Apple’s Market Share?
In November, Citi analysts conducted a survey that showed the iPad mini had only limited availability in U.S. Apple stores, while the fourth-generation iPad was fully stocked. From this data, analyst Glen Yeung wrote in a research note seen by CBS that “While not explicitly asked, it is clear in our survey work that [the] iPad 4 is not selling well, cannibalized by Mini sales.”
Our 20-page proprietary analysis of Apple’s stock is ready. Click here to get your Cheat Sheet report now.
But subsequent evidence produced by Cowen and Co.’s survey of 1,225 U.S. adults proved that iPad mini was actually creating more demand. According to the compiled data, only 16.6 percent of respondents were purchasing the device to replace another tablet, and only 29 percent of that percentage said that the tablet being replaced was a full-sized iPad.
Further data, supplied by Morgan Stanley’s poll, found that iPad mini sales were even growing Apple’s market share. As AppleInsider reported, 47 percent of iPad mini purchasers were buying their first Apple tablet, while 56 percent of 9.7-inch iPad purchasers were new customers. According to analyst Katy Huberty, these figures show that the iPad mini’s cannibalization risk is “manageable.”
CHEAT SHEET Analysis: Will These Results Be a Positive Catalyst for Apple’s Stock?
One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. In this case, Morgan Stanley’s numbers revealed that rather than confuse customers, Apple’s wider range of tablet offerings have helped the company to grow its market share. As the 7.9-inch iPad mini has accounted for 34 percent of planned iPad purchases, it has become a “key demand driver” for Apple’s tablet business.