Apple's New M4 iPads: 'More Powerful Than Any AI PC' Today, Set To Boost Sales

On May 7, 2024, Apple Inc. AAPL announced the launch of its latest iPad models: the iPad Pro equipped with the powerful M4 chip and OLED displays, and the iPad Air now featuring the M2 chip.

These introductions mark the first update to the iPad lineup since October 2022, signaling a significant step in Apple’s product evolution, and are expected to improve the revenue mix and drive growth going forward, according to Goldman Sachs.

Key Insights from the New iPad Launch

Goldman Sachs equity analyst Michael Ng highlighted several critical aspects of the new iPad releases that investors should note:

1. Support for Revenue Growth: “The introduction of the new iPad models aligns with Apple’s forecast for F3Q24E, which anticipates double-digit year-over-year growth in iPad revenue,” Ng stated. This growth is supported by clean iPad channel inventory, thanks to strategic efforts to clear out older models before the new releases. This move is particularly expected to bolster revenue trends in Greater China.
2. Advancements in AI and Processing Power: The new iPad Pro features Apple's latest M4 chip, which is described as “more powerful than any AI PC NPU today.” The M4 chip's Neural Engine can process up to 38 trillion operations per second, outpacing any current AI PC neural processing unit. This enhancement underscores Apple’s ability to handle on-device AI workloads across its product lines, including the iPhone and Mac, without needing additional upgrades.
3. Potential for Improved Price and Product Mix: The new lineup introduces a larger variety of sizes and prices, particularly for the iPad Air, which is now available in 11-inch and 13-inch models. This change is significant as “half of the iPad Pro users purchase the larger screen size,” presenting a clear opportunity to improve the price and product mix. The iPad Pro starts at $999 for the 11-inch model and $1,299 for the 13-inch model, showing a price increase compared to the previous models from October 2022. Even with increased starting storage (256GB versus 128GB), there remains a roughly $100 price hike, normalized for this change.
4. Additional Product Updates: Alongside the iPads, Apple announced new models of the Magic Keyboard and the Apple Pencil. The Magic Keyboard, priced at $299 for the 11-inch and $349 for the 13-inch, includes a larger trackpad, a USB-C port, and a functional top row. The Apple Pencil Pro, at $129, is compatible with both the new iPad Air and iPad Pro, introducing features like squeeze, barrel roll, and haptic feedback. These are the first updates to the Smart Keyboard since 2019 and the Apple Pencil since 2019.

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Goldman Sachs’ Outlook on Apple

Goldman Sachs has reiterated a Buy rating on Apple with a 12-month target price of $226, implying a potential 25% increase from current levels.

According to Ng, while the market is concerned about slower product revenue growth, “the strength of Apple’s ecosystem and the visibility of its revenue streams should offset these worries.”

Factors like Apple’s growing installed base, the secular growth in services, and continuous product innovation are expected to balance out the cyclical challenges in product revenue, including the longer iPhone replacement cycle and softer demand in the PC and tablet markets.

New Apple’s iPads: Detailed Pricing and Specifications

Below is a comprehensive look at the new models, their specifications, and pricing:

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