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Apple Car Opportunity Too Big For iPhone Maker To Ignore: Analyst

Talk-show host Oprah Winfrey once gave every member of her studio audience a new car. Winfrey, who recently signed a deal to make video programming for Apple (AAPL), could soon be pointing to the iPhone maker and shouting "You get a car!"

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Apple has long been rumored to be working on a self-driving electric car, but the buzz has died down over the past year or so. Speculation shifted from Apple making its own vehicle, which some dubbed the iCar, to it making autonomous-car technology to supply to existing automakers.

Guggenheim analyst Robert Cihra predicted Wednesday that Apple eventually will come out with its own car. In a report titled, "The Ongoing Case for an Apple iCar," Cihra said the market opportunity is simply too large for Apple to ignore.

"We believe Apple needs big new TAMs (total addressable markets) to keep growing and we reiterate our expectation that it ultimately launches a self-driving car, irrespective of contrary news flow and even its own hesitations to date," Cihra said.

The big draws of a market worth over $2 trillion and the tech disruption caused by electric vehicles plus software and artificial intelligence "make it too hard to resist," he said. It could open up growth for the next decade-plus for Apple, he said.

"Apple is also investing in original media content as its other big new TAM, but we see cars better fitting its product-centric business model," Cihra said. Apple has signed video content deals with Winfrey, filmmakers Steven Spielberg and M. Night Shyamalan, among others.

Cihra reiterated his buy rating on Apple with a price target of 215. Apple shares rose 0.7% to 185.50 on the stock market today.

Apple Car Could Move The Needle

The automotive business is one of few markets that could help Apple realize meaningful sales growth, he said.

"Consensus is that Apple has pulled back on ambitions to launch a car and is now just focusing on autonomous tech to sell to others," he said. But Apple has never acted as a supplier of core technology to others. Its business model is to own and control the end-to-end experience, Cihra said.

Apple has a permit to test autonomous vehicles in California. It also has filed patents in autonomous vehicle control, guidance and navigation systems. There's also related neural networking, lidar detection, camera and machine vision systems. Plus, it has patents in vehicle climate control and body structure, Cihra said.

"Given the market's sheer size and parallels to Apple's historical MO, we remain convinced that it will inevitably be drawn into launching its own car," Cihra said.

Apple recently hired Jaime Waydo, lead systems engineer for Alphabet (GOOGL)-owned Google's Waymo self-driving cars. That follows the hiring in April of Google's former senior vice president of engineering, John Giannandrea. He will be Apple's new overall chief of machine learning and AI strategy, Cihra said.

Even if self-driving cars ultimately sell more to fleet operators than consumers, the business would still be attractive to Apple, Cihra said.

The New York Times reported last month that Apple is partnering with Volkswagen (VLKAY) to turn T6 Transporter vans into self-driving vehicles to shuttle around Apple's own employees.

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