How to Profit From the New iPad

Apple Inc. AAPL largely delivered what investors were expecting when it unveiled the new iPad yesterday.

On the surface, the new tablet looks a lot like its predecessor, the iPad 2. But under the hood, Apple Inc. has given it a number of upgrades, including a faster processor, a high-resolution screen and the ability to access 4G LTE networks, which are up to 10 times faster than the 3G networks that are mostly in use today (more on that in a moment).

Significantly, when the new model goes on sale on March 16, it will be priced at $499 ($629 for the 4G version). That’s the same pricing structure the company used for the iPad 2.

Apple Inc. will continue to sell the iPad 2, but at a reduced price of $399 in a bid to fend off competition from cheaper competitors, like Amazon.com’s AMZN Kindle Fire and the Research in Motion RIMM PlayBook.

New iPad Fails to Budge Apple Inc. Shares

Apple shares actually declined during the announcement by CEO Tim Cook, but they rose afterward, closing at $530.69, up 0.08% on the day.

That had many in the business media comparing the new iPad with the launch of the iPhone 4S, which met with a similar shrug when it was unveiled last fall. The Street.com’s Jim Cramer thinks investors could learn a lot from that example, particularly given the stock’s big jump of late (up over 36% since December 1):

“I want to reference what happened with the iPhone 4S. [The stock] sold off, and then came back when people realized how great the 4S really was, because of the Siri function. That’s now my new mode about what can happen with Apple. It can sell off, and then when people realize how great the iPad 3 is, it can come back … I think [waiting for the selloff to buy] is a very reasonable strategy.”  

Others were a bit more pessimistic about the stock’s prospects. Quoted in the U.K. Telegraph, analyst Colin Gillis of BGC Partners in New York summed up the situation confronting Apple Inc. this way: “The problem Apple has is that it needs to keep shattering records just to meet the market’s expectations.”

Still, those worries didn’t stop Zacks.com from listing Apple Inc. as its “Bull of the Day” yesterday morning, before the iPad release. The site also raised its price target to $654 and upgraded the stock from Neutral to Outperform.

Zacks based its upgrade on a number of factors in addition to the new iPad, including Apple’s “superior product pipeline, apps, strong iCloud revenues … loyal customer base and international expansion,” Zacks particularly liked the company’s prospects in developing markets, where it expects Apple Inc. to succeed “due to the growing affluence of the middle class.”

Investing Daily analyst, Roger Conrad, pointed out, that the one ingredient Apple is currently missing is a dividend.

Apple Inc. Shares Aren’t the Only Way to Tap Into iPad Profits

Still, if you’re unsure about holding Apple shares at this time, there are other ways to profit from the new iPad. For example, you could buy shares of companies who make components for Apple. MSN Money suggests four, including Triquint Semiconductor TQNT.

Another way is to buy wireless companies whose networks are strong enough give iPad owners the fastest performance from their new tablets. According to Credit Suisse analyst Jonathan Chaplin, there’s one natural choice: “It’s great news for Verizon,” he says, “They have a great LTE network that is empty, so they can afford to fill it up.”

Verizon VZalso has a big lead over AT&T in this area. Credit Suisse expects Verizon’s 4G LTE network to cover 285 million people in the U.S. this year, compared to AT&T’s upgraded network, which only covers 74 million people.

Even better, unlike Apple, Verizon pays a dividend, and a generous one at that: quarterly payments of $0.50 a share now yield 5.15% on a yearly basis.