Apple Inc AAPL could reach a market cap of $3 trillion, $1 trillion more than its current market cap once Apple cars hit the road.
What Happened: On Friday, Citigroup analyst Jim Suva estimated California-based Apple could increase its market cap by 50% in the years ahead, depending on how it rolls into the electric vehicle market.
The analyst gave two scenarios: The first predicts Apple could increase its sales 10-15% and EBITDA by 5-11% if the company designs an Apple-branded car and outsources its production to an automaker.
The second sees Apple increasing its sales 2% and EBITDA by 1-2% if the company creates an IT ecosystem, such as Apple CarPlay. Suva sees the first scenario as the most likely.
“We do believe Apple will likely make an Apple car via outsourced production and that this will be part of the road for Apple to travel from a $2 trillion market cap to $3 trillion,” noted Suva.
Why It Matters: Amid the recent sector-wide tech sell-off, shares of Apple have fallen 15% since a January high. On March 10, however, Wedbush added the company to its “Best Ideas” list and analyst Daniel Ives rated Apple as Outperform, giving a $175 price target, which he said could reach $225 with a bull case.
The EV market is quickly gaining traction and by 2025 is estimated to be a $649.95 billion industry. An Apple car could overtake its other products as the largest revenue stream for the company.
“By 2025, the EV hardware market is estimated to exceed the combined smartphone, PC, tablet and wearable hardware markets,” Suva said in a note.
What’s Next: Rumors of which automaker Apple might be looking for as a partner has swirled recently.
In February, it looked as though Hyundai Motor Company GDR HYMTF might have snagged the deal, but those rumors were quashed amid reported internal disagreements at Hyundai.
Since then there have been rumors Renault ADR RNLSY may now be the front-runner.
Investors will be watching closely to see which company Apple decides to team up with over the coming months. It plans to produce its first EV in 2024.
APPL Price Action: Apple shares were trading down 0.87% at $120.89 at last check Friday afternoon.
Related Link: Click here to learn more on Benzinga's EV page.
(Photo by Bangyu Wang on Unsplash)
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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