With 50-60% Chance of Becoming a Reality, Apple (AAPL) Car Will Focus on Design, Connectedness and Automation, Gene Munster Says

While Apple (NASDAQ: AAPL) has been busy building a team to develop car, a project said to be named "Project Titan", a vehicle from the tech giant is still likely years and years away.

In a note to clients today, Piper Jaffray analyst Gene Munster said he believes a car from Apple is closer to 10 years away versus the 5 years some see. Still, Munster believes anticipation of the car will bolster Apple's stock multiple "as investors increasingly view the opportunity as a long term growth driver." This could be a good thing for investors given that Apple trades at or below the market multiple.

Munster notes that many other tech companies have also been focusing on the auto industry over the past three years. "Fast growing, auto-focused companies like Uber and Tesla have rapidly reshaped segments of transportation in their vision, while Google has long experimented with autonomous vehicles," Munster commented.

The analyst sees the car as a significant opportunity for Apple, but they also expect Apple to be deliberate as always in its product development and testing and put a 50-60% probability on a car becoming a reality.

Here is what is known about the Apple car, according to Munster:

• In February, the WSJ broke news that Apple has hundreds of employees working on a car code named Project Titan.
• Next, in May, Apple VP Jeff Williams stated that the car is the “ultimate mobile device” at a re/ code conference.
• Most recently, reports suggested that Apple’s Special Projects group has engaged with GoMentum station, which is an autonomous vehicle testing facility.

Here is what Munster expects from an Apple car:

• Electric: " We expect the vehicle to be electric given Apple’s focus not only on environmentally friendly products today, but its vision to deliver future technologies even if they are a few years early (ex. touchscreen phones; thin, lower-powered laptops; eliminating floppy disk, then CD, and now USB)."
• Luxury: "We expect it to be in the luxury market (likely $50,000+) given Apple’s focus on the elegance of design and its unwillingness to sacrifice experience for price"
• They expect three core features for an Apple car: design, connectedness and automation
  • "First, we expect Apple to design an instantly recognizable vehicle that is also aerodynamically optimized. Given Apple’s expertise with materials like aluminum and glass, its likely that some elegant combination of the two would make up the exterior of the vehicle. It is possible that a car by Apple may look completely different than what we think of as a typical car today in terms of shape and size
  • "Second, we expect Apple to optimize its car to work with other iOS devices, include Beats audio, and utilize Apple services like Siri, Maps, Apple Music, HomeKit and the eventual video streaming service."
  • "Finally, we expect the car to include an autonomous capability. Given our expectation that a car may be at least five years away (see next paragraph), we believe that automation will be a key competitive feature by the time Apple unveils a vehicle. We note that the car could utilize Apple Maps for transportation directions, which has improved meaningfully from launch."

The firm maintained an Overweight rating and price target of $172 on Apple.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $107.72 yesterday.

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