Apple Stock Rises On Apple Car Speculation, But Wall Street Skeptical

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Apple stock rose Tuesday on a fresh news report about the tech giant’s long-rumored electric vehicle. However, many Wall Street analysts remain skeptical that the company will build a so-called Apple Car. Instead, Apple (AAPL) might be developing technology to license to automakers, they said.




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Reuters reported late Monday that Apple is moving ahead with a self-driving electric car and is targeting 2024 as the year it produces a passenger vehicle.

The effort includes “breakthrough battery technology,” Reuters said. Its battery design could “radically” reduce the cost of batteries and increase the vehicle’s range, the report said.

Apple has been developing an automobile or related technologies since 2014 under the code name Project Titan.

Apple Stock Revs Up, Tesla Stock Hits Brakes

Cupertino, Calif.-based Apple would work with contract manufacturers to produce the Apple Car, Reuters said. The company also would use partners to supply key elements of the vehicle, such as lidar sensors for computer vision.

If Apple does produce an electric vehicle, it could provide competition to industry leader Tesla (TSLA), analysts said.

In morning trading on the stock market today, Apple stock climbed 3.8%, near 133.05. Tesla stock dropped 2.3%, near 634.70.

Apple stock has formed a cup base with a buy point of 138.08, according to IBD MarketSmith charts. However, IBD Leaderboard analysis identified alternative buy points during its recent climb.

Might Sell Technology To Automakers

“While the story indicates Apple will likely produce a car in 2024, we think it’s a higher-probability outcome that Apple continues to develop an autonomous driving system that it would sell to traditional automakers,” Evercore ISI analyst Amit Daryanani said in a note to clients.

Additionally, he cautioned that automobile manufacturing is a “low-margin, capital-intensive business.”

Daryanani reiterated his outperform rating on Apple stock with a price target of 135. He is bullish on Apple stock for the iPhone 12 upgrade cycle and monetization of its installed base through services and wearables.

Elsewhere on Wall Street, Citi said it is “very skeptical” that Apple will produce a car due to its low margins. The firm believes Apple is more likely to sell an automotive operating system to carmakers.

Apple Has Key Ingredients To Make Car

However, Morgan Stanley analysts think an Apple Car is possible.

“Apple possesses the key ingredients that we believe are critical to be successful in the future auto industry,” Morgan Stanley analysts said in a note to clients. Those ingredients include access to capital, the ability to attract and retain top talent and proven hardware design expertise.

Morgan Stanley rates Apple stock as overweight, or buy, with a price target of 144.

Meanwhile, Loup Ventures managing partners Gene Munster and Andrew Murphy said Apple’s final approach to the auto industry is yet to be determined.

They said in a blog post that they previously described “Apple’s go-to-market strategy in AV (autonomous vehicles) as a coin toss between licensing autonomous technology to existing automakers and building an Apple-branded car.”

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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