But the key component is not likely to reach maturity until “towards the end of the decade,” says analyst Samik Chatterjee
From a note to clients that landed on my desktop Monday:
Key highlights relative to our expectations are: 1) Apple will aim to be a full-fledged manufacturer of BEVs [battery electric vehicles] with AV [autonomous vehicle] capability; 2) Apple will extensively rely on contract manufacturers to preserve returns despite lower hardware margins; 3) The launch will be delayed till AV technology reaches maturity, likely towards end of the decade; 4) All-in margins for Apple in the auto industry should be higher given high-margin Services monetization – amplified in a fully autonomous vehicle.
Go Big or Go Home approach. Despite well understood challenges in being a new OEM, and an easier alternative of being a technology supplier in the automotive industry, we expect Apple will look for control on the pace of innovation as it pursues differentiation and positioning in the growth market of BEVs with AV functionality. Primary reasons for interest in this end-market include: 1) TAM [total addressable market] of $2.55 trillion vs. $420 bn for smartphone; 2) Opportunity on installed base of 1 bn vehicles long-term, with expected transition towards BEV/AVs near-term; and 3) Synergies with existing Services and expansion of TAM in a fully autonomous vehicle.
Maintains Overweight rating and $150 price target.
My take: Go big or go home sounds like Apple. I hope they go big. I’ll be disappointed if they don’t.
I’m not saying Apple won’t introduce an EV, I just don’t see the motivation to do so, which means that if Apple is indeed working on an EV, it intends to bring a dimension to it that nobody has addressed as yet.
“…if Apple is indeed working on an EV, it intends to bring a dimension to it that nobody has addressed as yet.“
Exactly. I don’t necessarily agree with the “go big or go home” expectation, but I do know Apple is in the business of breaking paradigms. That’s the source of its high margins, since breaking paradigms inevitably gives Apple customers something worth those high margins. That “one thing more” product or service may be small, medium, or big, but it will definitely be good for folks, and thus most likely highly profitable as a result.
From late July 2020 the USD traded relatively flat until the November election, it then declined in an almost straight line from ~94.27 to ~88.16 (fully 611 basis points) last Tuesday. On that Tuesday Congress certified the electoral votes and the USD has rebounded in another straight line to ~90.20, its sharpest rebound since last March.
The trend bears watching as it may indicate that FX traders are seeing a bright future for the USD with the election process concluding.
I agree. It’s apolitical, as it, and Apple/AAPL should be.
If vaccine distribution can target those most vulnerable to death and disability, the US and world economy can recover quickly. This was always a three step process: (1) control the spread (i.e. flatten the curve); (2) develop a vaccine; (3) distribute the vaccine. Step 2 has been an unqualified success. Not much we can do about step 1 being badly fumbled, but there’s a decent chance that we can still pull off step 3.
“…significant FX headwinds…”
Fortunately, Apple is extremely good at tacking into the wind to supply continued forward motion….
“Hi, Katy, obviously, we don’t provide any outlook at the gross margin level for product categories. What I said in my prepared remarks, we expect gross margins in total for the company to be pretty much in line with what we’ve seen during the last quarter, which, obviously, as you said, it’s very good, right, because we are offering the new phones at price points that are essentially unchanged, and we’re taking on a lot of new technology into the phones. I would say the commodity environment is good.
For the first time in many, many quarters, I don’t have to say that foreign exchange is a headwind getting into the quarter.“