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UBS upgrades Apple, predicts it will take a big share of the electric vehicle market

·Markets Reporter
·2 min read
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"Go ahead, bite the big Apple (AAPL)," says UBS analyst David Vogt. 

The analyst has upgraded the stock to a Buy, raising his price target to $142 from $115. He highlights the company's ambitions in the automotive space, arguing "auto optionality will offset a 'normal' iPhone Cycle." 

Vogt says his new price target reflects a more "stable long-term iPhone demand", and captures the "real" option value of Apple's likely entry into the auto market.

"Our analysis of the auto market and Apple's multi-year investment in the industry (self-driving car licenses and LiDAR patents) suggests to us Apple's auto optionality is worth at least an incremental $14/share," Vogt said in a research note to clients. "Apple's current portfolio provides significant cash flow the company will likely utilize to enter the battery electric vehicle market."

Vogt says Apple can capture some of the battery electric vehicle (BEV) market given customer satisfaction is already high for the tech giant's products.

"We expect Apple's platform strategy and market share in the global PC and smartphone markets should enable Apple to introduce a branded BEV and achieve a minimum 5% market share in the global BEV market," he wrote. "Over the next ten years, we forecast the global automotive market will likely transition to almost 100% EV opening up a 90M unit market to new entrants with large installed bases of loyal satisfied customers like Apple." 

A customer enters the Apple store at Covent Garden in London August 7, 2010. REUTERS/Suzanne Plunkett
A customer enters the Apple store at Covent Garden in London August 7, 2010. REUTERS/Suzanne Plunkett

Even though Apple is not the first mover in the space, the analyst argued the company's "significant resources" should enable the company to be a "fast follower". 

"Our base case assumes Apple captures 8% of global EV units in 10 years with operating margins approaching 15%," wrote Vogt. 

On Wednesday Apple was trading up more than 2%. Year to date, shares are down about 7% as some investors have rotated out of tech into cyclical and value stocks. 

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 Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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