1. The people they're hiring don't make sense if Apple isn't building a car.
One headline that started the rumors was electric-car battery maker A123 Systems' lawsuit charging that Apple illegally hired Mujeeb Ijaz, chief technology officer of its venture technologies unit. By itself, that might not matter much: A123 also makes batteries for hand tools, and no one thinks Apple is going there. But Ijaz's 11 patents are all about how to integrate large-scale batteries with automobiles. "You would only hire this guy if you were making cars," O'Neill said. O'Neill pointed out that no other car maker has come close to matching Tesla's cost advantage in electric-car batteries. Apple has also hired former Mercedes-Benz R&D chief Johann Jungwirth.
2. The auto industry is ripe for disruption, and it's huge.
At $1.6 trillion a year, the auto market is four times as big as the smartphone business. "The world's currently richest, most valuable technology company will meet one of its most disruptable businesses," the Morgan Stanley analysts wrote. They emphasize that most of a car's major systems have changed little in decades.
Barclays analysts Ben Reitzes and Brian Johnson noted the car has so many different kinds of software that it's a "rolling legacy enterprise software environment," and Silicon Valley is set up to feast on legacy software.
3. The car is the untapped market for what Apple already does, and Google may go there also, pressuring Apple.
About 10 percent of people's free time is spent in cars, so naturally, people who sell content and ads want to reach them there. That's why both Apple and Google are already partnering with car makers to link their smartphones more tightly with cars' electronics. Google has a self-driving car project but isn't expected to make its own cars. Though as Barclays analysts noted: "It doesn't seem to us that Google is necessarily interested in entering the automotive manufacturing business, but it seems interested in dominating the OS so it can augment its search experiences. Apple may need to pursue an iCar so that Android won't be the mobile platform of choice while traveling."
Over time, the percentage of a car's value attributable to software will also rise, up from today's 10 percent, according to the Morgan Stanley team, making ownership of the whole car more important. How high will it go? Maybe 60 percent, they guess, once self-driving electric cars are the norm. That will both improve margins and favor software companies, they argued. But that number is a pretty naked guess.
"It seems like a strategy to make sure Android (and its link to Google Maps) isn't the dominant operating system in the car over the long term," Reitzes and Johnson reasoned.
Read MoreFour Internet stocks too rich to keep hoarding cash
4. The margins may not be a problem if Apple can remake the industry.
Tesla should achieve 15 percent operating margins by the middle of the next decade, Morgan Stanley predicts. Apple should make better margins than traditional car makers because of its upscale brand and the fact that it would own most of the software that flows into its cars, Huberty and Jonas argue, and could get near Tesla's targets.
Plus, of course, Apple has $180 billion of cash.
5. The car of the future may play into Apple's hands, and sooner than you think.
Not many people buy—or seem to want—electric cars yet, let alone self-driving cars. But if the technologies do reach commercial scale within a few years, incumbent automakers won't have a huge advantage in making or selling them, Morgan Stanley analysts contend.
The electric-car market alone could hit $70 billion by 2021 and still be only 2 percent of total cars, according to a Barclays estimate.
In the meantime, Apple's stock is likely to depend more on how Apple does with the iWatch and its long-in-development strategies to deliver entertainment via television sets. But you don't get to be the world's most-valuable company without thinking ahead.