iPad Gross Profit Margins Higher than iPod and Kindle Margins

Apple’s (NASDAQ:AAPL) gross profit margin on the first generation iPads sold in 2010 is expected to be around 55%.  In comparison, we estimate that Apple earns a 25% gross margin on iPods and Amazon (NASDAQ:AMZN) earns a gross margin of about 40% on its Kindle e-reader.

Furthermore, we estimate that Apple’s gross margin on its popular iPhone device declined from about 68% in 2007 to about 52% in 2009.  We believe that iPad gross margins will decline over time similar to margins on the iPhone but that iPad margins will remain above iPod and Kindle margins.  The declines will be driven be pricing reductions on the iPad that will help it appeal to a broader audience and  make it more price competitive with e-readers like the Kindle.

Trefis forecasts for iPad, iPod and Kindle gross margins. Click to modify iPad forecast.

We estimate that Apple’s iPad business constitutes only about 4% of the $267 Trefis price estimate for Apple’s stock and that the future trend in iPad gross margins will have a significant impact on the value of the business.  You can see and modify our forecasts for all of the factors for Apple’s iPad business here:

• iPad Pricing
• iPad Unit Sales
• iPad Gross Margin

For additional analysis and forecasts, here is our complete model for Apple’s stock.