Amazon's newest tablet could be the best rival to Apple's iPad, but only if the online retailer is willing to swallow selling the tablet at a loss, a study by Forrester Research finds.

The e-commerce giant could potentially sell 3 million to 5 million of the Android based tablets in the fourth quarter, but only if the tablet is priced below $300.

Comparing Amazon's efforts to dethrone Apple as the premier tablet supplier to David taking on Goliath, Forrester Research analyst Sarah Rotman Epps wrote that Amazon could make a significant dent in Apple's dominance if it sells the Amazon tablet cheaply and uses its brand name wisely.

"Amazon's willingness to sell hardware at a loss combined with the strength of its brand, content, cloud infrastructure and commerce assets makes it the only credible iPad competitor in the market," Epps wrote.

Amazon is planning to release its tablet as early as October and will sell applications from its Android app store and movies and mp3 downloads from the Amazon Cloud Player storage service. If Amazon could harness the company's app services with a cheap device it could very well be a serious contender in the tablet market.

Apple has remained the dominant force in tablets with nearly 29 million of its iPads sold to date. According to data by HIS iSuppli, Apple's iPad will account for more than 44 million tablet shipments this year.

Rivals have struggled to stake a claim in the heavily dominated Apple market. HP had to slash the price of its TouchPad to $100 just to generate enough user interest and even then the company is still pulling its support from the webOS.

Epps has one more piece of advice for Amazon: Try to downplay the Android aspect of its tablet.

"Only 9 percent of consumers considering buying a tablet actively prefer an Android tablet-compared with 16 percent who prefer iOS and 46 percent who prefer Windows. Barnes & Noble has chosen to emphasize its own brand and user experience on the Nook Color rather than emphasize the Google or Android brands, even though the Nook is built on Android. Amazon may not wish to go that far on the curation spectrum, but it does need to differentiate its flavor of Android from all the rest, and that may come from emphasizing the Amazon experience over the Google one," she wrote.

On the other hand, using Android could potentially mean that Amazon could ship with other tablet manufacturers like Samsung, Motorola, Asus and others.

"In a year from now, we could see a range of 'Amazon tablets' made by different hardware manufacturers," Epps wrote.