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.
Apple's successful experience in consumer design and interaction, seen by record iPhone sales, makes it a valuable asset to the automotive industry, GVA Research noted.
"We do have to think of automobiles as being the ultimate mobile device given their electronics content and their interface," Garrity said. "Apple potentially has a great deal of value to offer in this area."
He added that the company's $180 billion cash pile – one of the biggest among corporates – is expected to give it a leg-up on competition in the electric car market following reports that other tech firms like Sony are also reportedly entering the industry.
If the reports turn out to be true, the tech giant's focus will be on expanding its iOs operating system, said Cyrus Daruwala, managing director at IDC Financial Insights.
"By exploring the car, Apple is showing they can enter the industrial market and move up the value chain from consumers to big enterprise. It's a proof of concept, this shows they can be an enterprise operating system too."