While Apple has not yet confirmed it will even be producing a smaller iPad, nor set any dates for coming product announcements, reports claim Apple will launch the iPad Mini in October. (Read more: New Apple iPad Mini to Debut in October: report)
Despite the lack of guidance from the tech giant, rumors about an approaching launch date are likely true because Apple needs a smaller iPad to ward off competition in the tablet market, Moorhead said.
The iPad maker, which sold 17 million iPads in the fiscal third quarter alone, currently leads the tablet market overall, but Apple's competition is gaining ground in the smaller tablet market, Moorhead said.
"Apple wants to dominate all form factors for this kind of device. If you look at overall market share, they have 90 percent of tablet share today, but they don't want to give an inch or even leave an opening for a competitor, not an OS or an ecosystem," Moorhead said.
Yet Brian White, an analyst with Topeka Capital Markets, said he doesn't think its necessarily competition that is driving Apple to make a smaller iPad. White says it's a chance for the company to cash in on a growing market.
"I think they see a big opportunity they can tap into that they can't with the full size tablet," White said.
White, who has a 12-month price target for Apple of $1,111, said his firm has not factored in a mini iPad into their outlook for Apple, but they also expect a Fall launch.
The analyst, who prices a smaller iPad in the $200 to $250 range, said he also thinks a smaller iPad would likely outsell the full size tablet in the long-term and would cannibalize 10 to 20 percent of the full size iPad sales.
Apple's late CEO Steve Jobs shrugged off the idea of a smaller tablet in 2010, stating in an earnings conference call that 7-inch tablets were "dead on arrival."
However, court documents from the recent Apple versus Samsung patent case revealed that Jobs may have changed his opinion about the smaller tablets.(Read more: The Apple Email That's Likely to Worry Google, Amazon)
Google, Amazon and Samsung all already have smaller tablets that are priced below $300, but Apple will still be able to sell a smaller iPad at a slightly higher price because, well, consumers love Apple products.