Apple (AAPL) Well Positioned to Disrupt Car Industry - Jefferies

The auto industry is ripe for disruption and Apple (NASDAQ: AAPL) is well positioned to disrupt it with the introduction of a car as early as 2019, Jefferies analyst Sundeep Bajikar said Thursday. That said, the analyst believes the car will not be able to offset iPhone deceleration.

Bajikar cited a combination of five reasons the industry is ripe for disruption: 1) large target market size, 2) secular industry transition to electric powertrain and autonomous navigation, 3) threat from Google Car, 4) Apple's scale advantage, and 5) government policies favoring electric cars and automatic safety systems.

These reasons set up a favorable opportunity for Apple to add a Car to its portfolio of mobile devices, the analyst said.

While a car would provide much needed diversification away from iPhone, the analyst said EPS contributions from a Car may not become meaningful before iPhone decelerates.

"Our FY19 "blue sky" scenario EPS contribution of $0.32 from Car includes 200K Car shipments at ASPs of $55K, and Car OPM of 20%, ~1,090 bps higher than the Street 2019 OPM estimate for Tesla - we think investors would consider these assumptions highly aggressive," the analyst commented.

Bajikar said two things hold then back from becoming more constructive on the stock: 1) iPhone risk, and 2) limited potential Car contributions.

The firm maintained a Hold rating and price target of $126 on AAPL.

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 $114.32 yesterday.

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