Apple (AAPL) announced on Monday that it has sold around 3 million iPads in its debut weekend itself. The new iPad was launched in about 12 countries around the world on Friday last week and will be made available in 24 more countries by the end of this week.

For context, we do not have iPad 2's launch numbers but the first-generation iPad sold around 300,000 units on the launch day. A better context could be the launch of the incredibly successful iPhone 4S last quarter, which sold around 4 million units in its debut weekend.

However, the smartphone market is much larger than the tablet market, which was spawned only two years back with the iPad launch in 2010. The smartphone market has been in existence for a long time. The first iPhone was launched way back in 2007, when RIM's (RIMM) BlackBerry and Nokia's (NOK) smartphones ruled that world.

With the tablet market at such a nascent stage, it is encouraging that the iPad, in only its third-generation, is able to drive so much demand. The iPad is only the second most valuable business for Apple after the iPhone, and contrary to what most might think, it accounts for just under 13% of Apple's value presently. But if the still very young tablet market sees an explosion in demand similar to the smartphones, the iPad could command a bigger share of Apple's value and consequently drive Apple's price estimate even higher.

Our price estimate for Apple is currently at $550.

Upside to Apple if tablet market expands

Gartner estimates that the tablet market will grow to 326 million unit sales in 2015, or about 50% average annual growth rate. If Apple is able to grow its iPad sales at only 35% annually, its sales at the end of 2018 would be around 330 million, about three times our current estimate of 120 million. That could add an upside of 20% to our estimate for Apple stock value (see iPad 3 Success Could Spark Apple Run to $700).

If Apple is able to replicate the iPhone success with the iPad, the upside could be bigger. Apple's iPhone sales have grown by an average of 90% annually since 2008, the year after its debut. If Apple is able to grow its iPad sales at that rate for the next three years and then 30% until the end of our forecast period, we are looking at an upside of almost 50% from the current price estimate. You can move the trend line below and check out your own estimates.

However, if the nascent tablet market doesn't take off like smartphones did, or is eclipsed by another product possibly not even invented by Apple, the above scenarios may never play out. Historically, we have seen this happen with the netbooks, which never really took off as tablets such as the iPad nearly killed the market segment. There is also the fact that since the tablet market is so young, it will see the emergence of new competitors that might usurp significant market share from Apple. A huge threat could be the launch of Windows 8 tablets in the later half of this year.

Also, there is the risk of a recurrence of supply chain issues like last year when the Japanese earthquake raised concerns of a supply meltdown. However, with Apple planning on tripling its iPad coverage to 36 countries within a week of launch, there doesn't seem to be any such risk at the moment.