Apple's entry into the automobile market may finally silence the company's critics, analysts told CNBC, amid rumors that the Cupertino giant is creating an electric car.
"When one looks at Apple's stock, people criticize the company for having a phenomenally successful franchise of the iPhone. The question for investors has always been if Apple can give us a larger addressable end market going forward," said David Garrity, principal at GVA Research, on Monday.
The global automotive sector is exactly the kind of bigger market investors are looking for, he added, since it provides "multiples in terms of revenues and possible profit potential."
Several media outlets including The Wall Street Journal and the Financial Times reported last week Apple was working to create an electric car that may be driverless although the tech giant has yet to confirm the reports. The news comes amid concerns that the company's stock price is too inflated, having recently hit an all-time record high above $127. Apple made history last week when its market capitalization rose above $700 billion, higher than Switzerland's entire gross domestic product.
An entry into the car market fits in perfectly with Apple's long-term strategy and underpins share price gains, argued Ray Wong, principal analyst and founder of Constellation Research.
"This [a car] is the next phase in Apple's move towards building out the rest of its digital lifestyle. One of the things Apple is focused on is continuity of the experience. Rumors of the car business are Apple at its core: finding new markets for its operating systems. They've done it with music, phones, home and healthcare and now, possibly cars."
Wong is expecting the stock to pop 2 percent when U.S. markets resume trade on Tuesday as a result of the rumors. Wall Street was closed on Monday for the Presidents' Day holiday.