Apple Inc

Fundamentals

Written by Ophir Gottlieb and Jason Hitchings, 02-11-2016

THE STARTING LINE
Apple is positioning itself to enter into one of the world's largest and most competitive industries. The road to success is fraught with hazards and the potential reward is huge. Apple has built one of the strongest brands in history, turning electronic devices into status symbols through their brilliant marketing, design aesthetic, and reputation for dependability.


Now they will put their brand and technology prowess to the test as they plunge into the market of the world's most recognized status symbol: The Luxury Automobile.

Their brand and a substantial portion of their $600 billion market cap hangs in the balance.

THE TITAN IN THE ROOM
We start by capturing what is publicly known or widely believed about the Apple Car project, code-named "Titan":

• Elon Musk calls the Apple Car project an "open secret" and the San Francisco Chronical reports that Musk met with Apple's acquisition chief, Adrian Perica, in 2013, and likely CEO Tim Cook as well.
• Apple is poaching talent from across the automotive and battery industries. So much so, that, according to CNN:
  A123, an electric car battery maker, sued Apple for poaching its staff earlier this year. The Massachusetts company claimed that Apple has hired away five high-tech PhD and engineering employees, causing "irreparable harm."
  Another report states that enough engineers have been drawn away from Tesla as to impact Tesla's product roadmap, according to Apple Insider
• Over a thousand engineers are now said to work within Project Titan, according to CNBC and many other sources.
• An Apple-leased van filled with sensors has been driving around a San Francisco suburb, also reported by CNN.
• CEO Tim Cook has held discussions with BMW at BMW headquarters and toured the BMW i3 electric car manufacturing facility, according to Forbes and others.
• Apple already has products dedicated for the car, such as CarPlay, which its website touts as "a smarter, safer way to use your iPhone in the car".
• CML broke news that Apple registered apple.car and apple.auto website domain names.

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THE POTENTIAL
The automotive industry is one of the world's largest markets, with luxury cars alone accounting for $360 billion per year in sales and growing fast:

The electric vehicle market weighed in at over $80 billion in 2012 and is projected to hit greater than $270 billion by 2019:
The world's largest vehicle producer is, surprisingly to American car owners, Volkswagen, with global sales of over 200 billion euros per year, followed closely by Toyota (source: Statista). Put in perspective, Volkswagon has roughly the same total revenue as Apple's $240 billion USD. A successful launch for Apple could realistically double revenues, and with time, operating margins and substantial new profits would be sure to follow.

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THE RISK
The risk to Apple's brand if the car launch is unsuccessful is enormous. In 2010 an antenna problem with the iPhone 4 was a recoverable embarrassment. In the automotive realm, any mishap could have dire consequences. When Tesla was a little known startup with grand ideas, they were able to survive several batteries catching fire. Serious, potentially dangerous problems with the Apple Car would likely have far broader implications with down-stream effects across the Apple ecosystem.

THE TECHNOLOGY BREAKTHROUGH
Every technology that makes it mainstream hits a turning point. The advance goes from being a novelty for hobbyists, to a part of everyone's life. Apple was the catalyst for this movement with what were once called PDAs (Personal Digital Assistants) with the transformative iPhone. Apple did the same for tablets with the iPad, for MP3 players with the iPod, and now they are poised to make electric cars one of the defining technologies of our time. Bringing a technology mainstream requires a complex blend of forces to converge at once. The challenges are both technical and cultural, as information and trends spread through pockets of key influencers before breaking through or disappearing.

Hitting the technical inflection point is a critical part of having a huge success, and failing to do so is to fall into the "chasm" where many new technologies die. Aptera, Fisker, Coda, and Better Place all failed in their attempts to bring electric cars across this gap:


Through our extensive research, we believe we have found the break-through technology that will make the Apple Car a profound success. Top universities around the world have been researching this technology and we discovered a world renowned institution that has made a major advance. If this technology continues on track, the owner will dominate the electric car industry.

Looking at Apple's R&D spending, we see clearly the massive investment Apple is making in its future:
Apple is now spending $2.4 billion per quarter on R&D, and we've discovered where a sizeable chunk of the expenditure is likely going. Discover the technology that will revolutionize the electric car industry. Join us to get the full CML Apple Research Report, as well as our 2016 top stock picks, and a suite of analysis tools that were once only available to the top 1%. Click here.

FINISH LINE
No company is better positioned to make a huge technological investment, backed by a brilliant marketing campaign, and championed by a beloved brand, than Apple. If Apple succeeds in releasing its car, they are likely to not only reap enormous financial rewards, but also to massively swell the size of the electric vehicle market and, in so doing, create a permanent shift to a new era of automotive history.

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Thanks for reading, friends.