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Morgan Stanley On Apple: 'World's Most Valuable Company Meets Most Disruptable Industry'

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In a report published Tuesday, Morgan Stanley analyst Adam Jonas commented that he would not be "dismissive" of Apple Inc.'s (NASDAQ: AAPL) automotive ambitions and that being in the car business "could be very important" for Apple.

Based on Jonas' calculations, the automotive total addressable market is $10 trillion of installed base, with annual new vehicle revenues of $1.6 trillion. This figure "dwarfs" smartphones at $400 billion and PCs at $266 billion of annual revenue.

See Also: How Apple Could Add $100 Billion To Its Market Cap

"If Apple were to corner just 25 percent of the value of the car, it would be equivalent to the entire smartphone industry today," Jonas wrote. "The auto industry also needs Apple, we argue, because after over 100 years of status quo, the industry needs a change agent."

"Over time it could grow from the inside out to be a bigger part of the car."

Jonas added that the possibility of Apple "making" its own car cannot be ruled out, but a more realistic scenario involves Apple doing what it does best – infotainment. In fact, infotainment could be a "starting point" that can spread to the rest of the interior especially the HMI (human machine interface), ergonomics/controls and even interior design.

Apple has the brand and design talent "to take on the best" in the auto industry and the company can rely on existing automotive supply chain for non-critical components.

Bottom line, Jonas concluded by stating "ultimately, the size of the auto total addressable market and the additional opportunity of the car as the ‘fourth screen' for media consumption are too large for Apple to ignore, in our opinion, and likely will drive it to look to solutions around traditional auto industry bottlenecks."

Latest Ratings for AAPL

DateFirmActionFromTo
Jul 2017Morgan StanleyMaintainsOverweight
Jun 2017MizuhoDowngradesBuyNeutral
Jun 2017Pacific CrestDowngradesOverweightSector Weight

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