Tech giant and the largest company in the world by market cap Apple (NASDAQ:AAPL), blew the electric vehicle industry-wide open this week when it announced it was planning to resurrect its EV and autonomous driving vehicle plans, codenamed Project Titan. The early indication is that Apple would like to have its vehicles on the roads by 2024 which does give its competitors time to prepare for what could be an industry-altering entry. So far in 2020, the electric vehicle sector has enjoyed some of the largest gains by any group of stocks in a long time so the news from Apple immediately put a bearish outlook on some of the companies. Here are 4 stocks that are directly impacted by Apple’s new endeavor.
Tesla
(NASDAQ:TSLA): Anything to do with electric vehicles must go through the current industry leader Tesla. After Apple came public with its news, Tesla CEO Elon Musk tweeted that he had approached Apple CEO Tim Cook when the Model 3 was trying to get off the ground to buy Tesla for a tenth of the brand’s current value. This may just be the beginning of the war of words as the two mega-companies begin to joust over dominance in the EV space. If there is one company that has the pockets deep enough and a stronger brand presence than Tesla, it’s Apple.
Analysts are skeptical about Apple’s ability to produce an electric vehicle that can compete with Tesla in such a short period of time though. Even ARK investing’s CEO Cathie Wood has her doubts that Apple can scale to Tesla’s current technology in three years. Is this a legitimate shift in focus by Apple, or a desperate attempt to remain relevant as its current lineup of technology loses originality?
Tesla’s stock has seen a dip since it joined the benchmark S&P 500 index on December 21st during the quarterly rebalancing. The high volatility that Tesla investors once enjoyed may be over as the stock gets indexed across funds that track the greater S&P 500 index, allowing for more stability. According to Alter, investors have taken profits from the great bull-run that Tesla experienced in 2020, and are investing their money elsewhere. Tesla’s stock was affected immediately following the announcement from Apple, but it remains to be seen if this will truly be disruptive to Tesla’s business.
QuantumScape
(NYSE:QS): One of the newest electric vehicle stocks to play, QuantumScape came public via a recent SPAC IPO that is backed by none other than Bill Gates himself. QuantumScape exploded when Apple announced that it was entering the electric vehicle sector, as investors began to formulate thoughts of the tech giant buying out QuantumScape for its solid-state battery technology. Even though Apple stated that it would be building its battery tech in-house, it did not prevent investors from imagining a world where Apple opened up its checkbook to purchase the company.
QuantumScape is still years away from producing its batteries so perhaps aligning the timelines was another reason for the surge. Whatever the case may be, QuantumScape’s stock has soared since its debut on the public markets, peaking at $132.73 per share or over 1200% since before the merger was finalized. According to Alter, investors have been piling into SPAC IPOs in general, but especially ones in the red-hot EV space. QuantumScape may be an example of a stock with a valuation that is not yet justified by the company’s current state, but the optimism surrounding the technology is certainly evident in the stock’s sky-high price.
Luminar
(NASDAQ:LAZR): Lidar technology is something that many casual investors overlook when it comes to the electric vehicle industry. At its core, lidar is a technology that uses lasers and machine learning that can essentially re-create your environment via a 3D image. Why is that important? Well for companies like Apple and Tesla who are working towards the eventual goal of self-driving, autonomous cars, lidar may be the key to unlocking this potential.
Luminar is another red-hot stock that came public via a SPAC IPO earlier in December and has been one of the hottest stocks on FinTwit and other social media platforms. According to Alter, if investors want to invest in self-driving cars as a long play, lidar companies like Luminar are at good buy-in points at their current valuations. Just like QuantumScape, much of the excitement is based on investor hearsay and not actual proof. In fact, Apple is known to do much of its tech development in-house, including the recently released M1 chip that replaced Intel’s chip in Apple’s Macbook computers. Luminar may be worth a speculative add, but investors should be warned that it will be a long while before the company can say they are profitable.
NIO
(NYSE: NIO): You can insert any Chinese electric vehicle maker into this last paragraph as XPeng (NYSE: XPEV) or Li Autos (NASDAQ: LI) are affected as well. Nio has been a stock market darling over the last year as it has ridden the coattails of Tesla and returned nearly 1800% to investors over the past 52-weeks. While rival Xpeng has recently introduced its vehicles to continental Europe, NIO is slated to do so by the end of 2021. The two companies share success in their home market of China which happens to be the largest automobile market in the world, but international expansion has always been a goal.
Recent fraudulent accusations against another Chinese EV maker Kandi (NASDAQ:KNDI) has rekindled some American investor distrust in Chinese companies, especially after the Luckin Coffee debacle last year. If the United States is already wary of Chinese companies, one of the ultimate barriers to entry could be another American tech giant in the form of Apple, building electric vehicles in its home market. It is unclear if Apple would target China as a potential market as well, but given the world’s largest total addressable market, and their success with Apple products in China, it does not seem so far fetched at this point. According to Alter, investors have been shying away from Chinese EV stocks ever since the accusations against Kandi were brought forward, and these stocks could see an even further dip now that another huge player has entered the game.
