An Apple, Inc. AAPL Car could become a reality sooner than expected, Bloomberg reported Thursday.
The chatter sent Apple's shares to an all-time high of $158.67 on Thursday. The stock tacked on additional gains on Friday, and scaled to an intra-day high of $161.02 before closing at a new high of $160.55.
Munster Puts Odds At Over 50%: There are greater than 50% chances Apple will eventually release a car, but it is likely more than five years away, Loup Funds Managing Partner Gene Munster said in a note.
"While the eventuality of an Apple Car is far from certain, the continued talk about Apple's ambitions in the space is almost certain in the years to come, which should lead to multiple expansion for shares," the analyst said.
How Apple Stands to Benefit: Apple excels at a collection of hardware, software and services seen as integral to a self-driving car, which will become a "computer on wheels," Munster said
"I think of cars as big tech devices that will have services sold around the hardware. The software will hold it together," the analyst said.
This model has supported a 25-30% operating margin, in line with Apple's current margin structure, he noted.
Munster is of the opinion that, just like other Apple devices, Cupertino will design the car and a third-party would build it.
The revenue impact to the business, according to the analyst, would be material given the total addressable market for auto is massive.
Assuming Apple can capture 10% of the auto market and prices its car at $60,000, it stands to see revenues of $540 billion annually, the analyst said. In comparison, Apple is expected to report fiscal year 2022 revenues of only about $380 billion, he added.
Thus, Apple Car revenue could, over the long term, be greater than all of its other businesses combined, the analyst said.
The impact on Apple's valuation could be staggering, Munster said. Given shares trade at 6.8 times the revenues forecast for 2022, if Apple captures 10% of the global auto market and investors value auto revenue similar to how they currently value its revenues, an Apple Car alone can add $3 trillion to Apple's current market-cap of $2.6 trillion, he added.
On the other hand, if Apple captures 1% of the car market, it would add about $300 billion to the company's valuation, the analyst estimates.
Apple shares closed Friday's session up 1.70% at $160.55.
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