How investors can trade the Apple Car

Published Thu, Feb 4 20218:53 AM EST

Apple is nearing a deal with Hyundai-Kia to manufacture an autonomous electric vehicle, according to sources with knowledge of the matter, and the impacts of the tech giant's entry into the automaker space could reverberate across a number of industries. Semiconductor companies are among the names poised to benefit, along with Apple shares themselves, according to analysts. After years of speculation that Apple had its sights set on vehicles, CNBC learned on Wednesday that the deal with Kia is close to being finalized. The so-called "Apple Car" is tentatively scheduled to go into production in 2024, and will be manufactured at a Kia assembly plant in West Point, Georgia, according to the sources. "[The Apple Car] would further drive silicon content in autos and more importantly, be another catalyst that would spur future semiconductor capacity expansion," noted Stifel analyst Patrick Ho. "The semi equipment market is potentially at the early stages of growing spending trends that are tailored to meet many new market needs ... The technology market has evolved from a PC-centric world to smartphones to multiple markets like artificial intelligence, data centers, and automotive," he added. Ho said the Apple Car would likely enhance the already growing equipment spending trends. Within the semiconductor space, Stifel said Applied Materials , KLA Corp. and Lam Research are poised to be the largest beneficiaries of the capacity expansion plans. On the components side of things MKS Instruments is well positioned, while Entegris is well-positioned on the materials side of things. For Apple itself, the push into electric vehicles would give the company a foothold in the $10 trillion global auto and mobility market. Morgan Stanley's Katy Huberty noted that the current smartphone market is valued at $500 billion, meaning expansion into the auto sector could fuel Apple's top-line growth. "We do not believe investors are prepared for the 2nd order impacts of a potential Apple entry into the E-mobility and internet-of-cars space," added Morgan Stanley auto analyst Adam Jonas. Among the changes he pointed to include investors re-thinking the role of recurring revenue. Within the electric vehicle space, Jonas said his top picks remain General Motors , Aptiv and Tesla , all of which he has an overweight rating on. Wedbush's Dan Ives said that the Apple Car will add more than $30 per share of total addressable market to the Apple growth story due to the "golden age of EV transformation on the horizon." He has an outperform rating on shares of Apple, and a $175 target, which is about 30% above Wednesday's closing price of roughly $134. Meanwhile, Evercore ISI said that Apple's vertical integration will set it apart from other automakers. "AAPL's ability to develop and differentiate products by building hardware, software and services is unique (barring TSLA)," said analyst Amit Daryanani. "AAPL will innovate not just on the car but also on mobility – iPhone was a computer in your pocket, Car will be a computer on wheels," he said. The firm has an outperform rating and $163 target on the stock. However, nothing is finalized yet between Apple and Kia. The talks could still be pushed back, and Apple could also choose to partner with another vehicle manufacturer. Shares of Apple rose 1.6% in premarket trading. - CNBC's Michael Bloom, Phil Lebeau and Meghan Reeder contributed reporting.

The logo of Apple company is seen outside an Apple store in Bordeaux, France, March 22, 2019.

Regis Duvignau | Reuters

Semiconductor companies are among the names poised to benefit, along with Apple shares themselves, according to analysts.