An Apple a Day Keeps the Doctor (of Underperformance) Away! – Does Apple Inc. (NASDAQ:AAPL) Still Look Cheap?

Yesterday at Apple Inc.’s (NASDAQ:AAPL) live press event in San Francisco, CEO Steve Jobs unveiled the much anticipated second version of the iPad (iPad 2), which will begin shipping March 11th. Despite Jobs’ recent health concerns (he is still on medical leave), the man behind the most innovative technology company in the world right now was determined to unveil the iPad 2 on his own, and looked relatively healthy while doing it according to several attendees, saying that “we’ve been working on this product for awhile, and I didn’t want to miss it.”

The iPad 2 is a very impressive gadget – much like its predecessor – and should push the company further ahead in the tablet race (Apple owns 90% of the tablet market share selling approximately 15 million devices in nine months during 2010), making it that much more difficult for competitors to catch up in the near term. Here are some highlights of the iPad 2:

• 33% thinner and 15% lighter than the iPad 1
• New dual-core A5 processor – twice the power and nine times the graphics performance of the iPad 1
• Same 10 hr battery life as iPad 1
• Equipped with 2 cameras (front and rear facing) – allowing for video chat
• Will run on both AT&T & Verizon
• HDMI mirrored video output, up to 1080p
• New “smart cover” with magnetic clasps, which wakes the iPad up or puts it to sleep depending on whether the cover is on or off, has a microfiber cloth that cleans the screen, and also serves as a stand to keep the device upright
• Black and White versions available
• Comes with iOS 4.3, the latest version of Apple’s mobile operating system – faster Safari performance, iTunes over Wifi, FaceTime calls, etc.
• Same screen resolution as iPad 1, possibly disappointing those hoping for a “retina” display

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Apple essentially delivered on nearly all expectations for the newer version of the iPad, but what’s most impressive is that it will be offered to consumers for the exact price as the iPad 1. This is quite remarkable and will be very stifling even for Apple’s most aggressive competitors. The 3G-enabled, 32GB Motorola Xoom (released just a week ago), which has been recently heralded as the first tablet that could actually compete with the iPad, is currently being sold at $800 ($70 more than the comparable version of the iPad 2), and boasts only 100 Honeycomb-ready apps versus approximately 65,000 for the iPad. Many of the features the Xoom was able to boast over the iPad 1, were just matched or outdone by the iPad 2. And there isn’t another “competing” tablet due out soon to try to outdo what the iPad 2 has just done. One last important point is the slash in the iPad 1’s price to $399. This will make it difficult for manufacturers trying to undercut Apple even on price. All we can say is get ready for another year of tablet dominance for Apple.

At the end of the day, a healthy Steve Jobs, an innovative and attractively priced iPad 2, and the lack of viable competition in the tablet arena are all good signs for the health of Apple’s stock going forward. In addition, Apple has proven to be a consistent wealth creator and looks very attractive on a valuation basis according to AFG metrics. Despite being up nearly 300% from 2 years ago, shares of Apple currently have 6% long-term revenue growth priced in, assuming EBITDA margins and asset turnover stays consistent with last year. This is an extremely low expectation for a company expected to grow sales 52% and 17% in FY11 and FY12, respectively.

I guess the old saying is right: “An apple a day, keeps the doctor (of underperformance) away.”

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