From Dan Gallagher’s “Apple Needs One More Thing Again” ($) in Thursday’s Wall Street Journal:
This isn’t the first time Apple has seemed on the threshold of challenging Detroit. The Wall Street Journal reported in 2015 that the company planned to launch an electric car in 2019. A year later, the company was laying employees off from the project and rethinking its plans. Automobiles have indeed proved to be a tricky area for tech giants to disrupt. And Apple investors who treasure the company’s 38% gross margins would be in for a rough ride; the world’s top-10 auto makers by market value average gross margins of 15%, according to data from S&P Global Market Intelligence.
Apple certainly has some interesting things cooking. The company spent a record $18.8 billion in research and development for the fiscal year ended September. That equates to just under 7% of annual revenue—the highest portion since 2003, when Apple was in the early days of developing the first iPhone.
But after running up more than 78% this year, Apple shares now trade at 33 times forward earnings—more than triple its multiple in 2015 when the first car rumors were swirling. Which means investors are already banking on dreams of the next big thing.
My take: Plenty of time before the car shows up to knock the stock down again.