When media speculated that Apple (NASDAQ:AAPL) will enter the self-driving car market, bullishness continued and sent the stock closer to its yearly highs. Strategically, Apple’s foray into the automotive software space is logical. CarPlay is already an extension of Apple devices in vehicles.
Apple needs to develop self-driving solutions to expand its device to reach beyond televisions, smartphones, and computers. Every other fast-growing technology firm is doing the same thing. For example, Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC) are invested in the space. Tesla’s (NASDAQ:TSLA) eight-fold return from yearly lows is a reminder of the market’s bullishness in the electric vehicle (EV) space. So, if Apple extends its reach into the self-driving EV market, its stock’s price-to-earnings multiple will expand.
Apple cannot afford to ignore the self-driving software and hardware market because the smartphone sector is saturated. The stay-at-home theme of the year weakened the demand for such devices. Consumers could afford to wait for another upgrade cycle this year. Slower iPhone sales will hurt Apple’s revenue growth, too.
Your Takeaway
Apple generates healthy cash flow from its subscriptions and device sales. It can afford to invest heavily in self-driving technology. This will widen its already strong moat in its ecosystem. It will also create competition for Tesla and Chinese EV companies.
