Tablet devices are disrupting traditional desktop computing, but the market is thoroughly dominated by Apple Inc. (AAPL). In the last few months, competitors, notably Amazon.com (AMZN), disrupted the pricing model and the ideal size for book reading by launching 7-inch devices. Around the time that the Kindle Fire was released, Research in Motion (RIMM) cut the price of its Playbook. More recently, Google released its Nexus device, starting at $199.
Not to be outdone, according to WSJ, Barnes & Noble dropped the prices of its Nook Tablet by $50 to $199 for its 16GB edition. The lowest price for a Nook is its Nook Color, now at $149. Recall that in May, Microsoft (MSFT) invested around $600 million in the company.
What is the investment opportunity for investors who want exposure to the tablet market?
The investment proposition for tablet makers does not rest on the price or the profit margin for tablets. Value comes from the revenue growth and the future profitability for the content that is sold on these devices.
Business Section: Investing Ideas
Take the following criteria as a starting point for buying opportunities when evaluating the companies in more detail:
- Unit sales growth for tablets
- Gross margin for sale of content
- Revenue sources from businesses outside of tablets
In the order of preference using the above criteria, here are some companies involved in the tablet space to consider for your portfolio:
To get a snapshot for each company, click on the company icon. To get more detailed fundamental information on any of the companies, open the snapshot and select “number cruncher.”
Use the Compar-O-Matic to see changes in quarterly sales for the names listed above:
1. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $582.79B, most recent closing price at $621.70. Apple dominates the tablet market, maintaining its lead over competitors with its 3rd generation iPad. Apple is rumored to be releasing a smaller iPad as early as September.
2. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $255.02B, most recent closing price at $30.42. Invested in Barnes & Noble’s Nook e-readers. Microsoft announced the “Surface” tablet that will be running the new Windows 8. The device is scheduled for release on October 26.
3. Amazon.com Inc. (AMZN, Earnings, Analysts, Financials): Operates as an online retailer in North America and internationally. Market cap at $105.22B, most recent closing price at $232.75. Offers Kindle line of e-readers and tablets. Amazon released its Kindle for $199. The company makes most of its profits from the annual “Prime” subscription.
4. Barnes & Noble, Inc. (BKS, Earnings, Analysts, Financials): Operates as a content, commerce, and technology company in the United States. Market cap at $857.6M, most recent closing price at $14.31. Offers the Nook e-readers and tablets.
5. Netflix, Inc. (NFLX, Earnings, Analysts, Financials): Provides subscription based Internet services for TV shows and movies in the United States and internationally. Market cap at $3.33B, most recent closing price at $59.90. Netflix does not make tablets, but its content may be accessed on tablets and gaming consoles.
6. Research In Motion Limited (RIMM, Earnings, Analysts, Financials): Designs, manufactures, and markets wireless solutions for the worldwide mobile communications market. Market cap at $4.35B, most recent closing price at $8.29. Smartphone maker RIM released a Playbook tablet in 2011. The company updated QNX to 2.0 for free for users. 4G was recently released.
7. Best Buy Co. Inc. (BBY, Earnings, Analysts, Financials): Operates as a retailer of consumer electronics, home office products, entertainment products, appliances, and related services primarily in the United States, Europe, Canada, and China. Market cap at $6.53B, most recent closing price at $19.21. Retailer Best Buy sells tablets, but is struggling to beat online retailers like newegg and Amazon.com
8. GameStop Corp. (GME, Earnings, Analysts, Financials): Operates as a retailer of video game products and personal computer (PC) entertainment software. Market cap at $2.31B, most recent closing price at $17.74. GameStop recently announced it would sell tablets at its retail stores.
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Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- Apple Inc. (AAPL, Chart, Download SEC Filings)
- Microsoft Corporation (MSFT, Chart, Download SEC Filings)
- Amazon.com Inc. (AMZN, Chart, Download SEC Filings)
- Barnes & Noble, Inc. (BKS, Chart, Download SEC Filings)
- Netflix, Inc. (NFLX, Chart, Download SEC Filings)
- Research In Motion Limited (RIMM, Chart, Download SEC Filings)
- Best Buy Co. Inc. (BBY, Chart, Download SEC Filings)
- GameStop Corp. (GME, Chart, Download SEC Filings)
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