Apple (AAPL) plans ambitious autonomous EV. Should I invest now?

Breaking news yesterday suggested Apple (AAPL) has set an ambitious target of 2025 for a fully autonomous car. Is it time to buy the shares?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Electric cars charging in station

Image source: Getty Images

There’s not a day goes by that I don’t see electric vehicles (EVs) in the news nowadays. Yesterday, it was no other than Apple (NYSE: AAPL) and its plans to debut a fully autonomous EV as soon as 2025. Apple is currently the most valuable company in the world, but even for a company this size, it’s quite an ambitious plan.

Let’s take a closer look at Apple’s decision to launch a fully autonomous EV, and if I should buy the shares.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Apple plans an EV

It was Bloomberg that first broke the news on AAPL’s accelerating plans to launch a fully autonomous EV. With a whole host of companies developing EVs today, including Tesla and now Rivian, Apple is perhaps trying to muscle into a crowded market.

But it’s the promise of a fully autonomous EV that caught the eye of investors yesterday. After the news broke, the share price rallied 2.4% to over $157.

Apple plans to have no steering wheel or pedals, with an interior designed around hands-free operation. Targeting a launch date of 2025 is ambitious, and earlier than initially thought.

This sounds promising, although at the same time, maybe too difficult in the timescale. Tesla has attempted to develop its own self-driving EVs to mixed success. So if Tesla, a company dedicated to developing EVs, hasn’t been able to develop fully autonomous technology, then Apple may also struggle.

Apple’s current financials

But before I invest in any company, I need to understand the financials and potential growth.

AAPL is a truly huge company with a market value north of $2.5trn. Its revenue forecast for this year is $379bn and profit of $92.5bn. Growth is uninspiring though, with revenue estimated to increase by only 3.6%.

The shares are valued on a price-to-earnings ratio of 28, which I consider high for such a tepid revenue growth forecast. There may already be some success over Apple’s potential EV priced into the shares.

Should I invest?

AAPL may just win the race to be the first company that commercialises a fully autonomous EV. Indeed, it’s been developing its own computer chip that will power the driving system, and road testing should commence soon.

However, the team has experienced quite some churn over recent years, suggesting things haven’t always gone to plan. The current leader of the EV project, Kevin Lynch, was appointed after his role as a software executive working on the Apple Watch. This product has largely been a success for Apple, but it means it’s hugely ambitious EV plans are being led by an executive without direct vehicle experience.

The EV market is also a divergence from Apple’s core hardware and software markets. The company achieved a gross margin of 42% last year, although the largest EV maker, Tesla, only managed 21%. Therefore, the EV market might not be as profitable for Apple as its current core businesses are. There is also likely considerable investment to come, which will be a cash drag on company financials.

Overall, I think this is an exciting area. But as an investor, I’m staying away for now. AAPL’s shares aren’t exactly cheap to start with, and I think this project could be challenging to meet before the 2025 target. I’ll keep watching things develop before I buy the stock.

But this share could be worth a closer look...

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Dan Appleby has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Tired woman sleeping on London underground
Investing Articles

5 steps to monthly passive income streams of £500

Aiming for regular passive income streams, our writer walks through five key steps he would take.

Read more »

Business people shaking hands
Investing Articles

Director dealings: HSBC, National Grid, Taylor Wimpey

Director dealings can indicate whether a company's doing well. So, here are this week's director dealings from three of the…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

2 lesser-known stocks with 10% dividend yields!

With sky-high inflation, sizeable dividend yields can help my portfolio grow. These two stocks are paying 10% on average.

Read more »

Businessman pulling out wooden brick from toppling stack
Investing Articles

Is the Woodbois share price a bargain – or a value trap?

The Woodbois share price has seen big swings recently. Our writer considers why and explains his response.

Read more »

Electric cars charging in station
Investing Articles

Here’s why NIO stock is my top EV pick!

NIO stock had been one of the worst-performing shares over the last year, but it appears to have bottomed out.…

Read more »

Risk reward ratio / risk management concept
Investing Articles

The JD Wetherspoon share price has fallen 45% — should I load up?

The JD Wetherspoon share price has shed almost half its value in the past year. Should our writer buy another…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Down 50%, is the Scottish Mortgage share price a bargain in plain sight?

The Scottish Mortgage share price has lost half its value in recent months. Is it now a bargain for our…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

A cheap UK share for the cybersecurity boom!

I'm backing this UK share after its share price collapsed this week. In fact, I've recently added this cybersecurity stock…

Read more »