Analyst Brian Marshall with Broadpoint.AmTech issued a note to investors Tuesday forecasting the "sticky" nature of the iPad and content purchases for the new device. He believes content revenue will top 10 percent of total iPad hardware revenue by December of 2010, and a year later that number will nearly triple.
"We believe the iPad offers a rich media experience that will translate into a content-based recurring revenue stream over time," Marshall wrote.
If true, it would be a significant change for Apple, which had long maintained that both the App Store and iTunes do not create much profit for the Cupertino, Calif., company. In January, Apple Chief Financial Officer Peter Oppenheimer said the company runs "a bit over break even" for both the App Store and iTunes stores. Apple has said for some time that those businesses are not meant to be profit generators, but rather a means of attracting customers to the products they represent.
The analyst has also increased his forecast for iPad shipments in the 2010 calendar year to 4 million units, up from a previous prediction of 2.2 million. He said that "if the device lives up to its potential," he could see it shipping more than 7 million in this year alone, a number that skews higher than most Wall Street estimates.
Accordingly, Marshall has also raised his earnings per share estimates for 2010 by 6 percent, to $12.75. That's up from his previous prediction of $12, and above the Wall Street consensus of $12.14.
Marshall said he believes the general view of the iPad, particularly in the media, is overly pessimistic.
"We note the vast majority of the naysayers have not yet had the opportunity to use the iPad on a firsthand basis," he wrote. "As we stated in the past, we were hooked after the first 15 minutes of use. In our view, the true genius of the device is its media/content aspects (e.g. eBooks, newspapers/magazines, Apps/games, movies/TV episodes, etc.) which we believe will be recurring in nature."