Apple Stock Outlook: Google’s Money Is Helping Finance Apple’s Research On Self-Driving Cars and Augmented Reality

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Apple Stock Outlook

Summary:

  • Bernstein analyst A.M. Sacconaghi Jr. estimated that Google paid Apple $3 billion to remain the default search engine on the iPhone/iPad.
  • This is triple the annual $1 billion payment that Google used to pay Apple three years ago to keep its default search engine status on the iPhone/iPad.
  • Google’s willingness to pay triple validated just how important Apple’s mobile ecosystem is to advertising-dependent companies. Apple’s iOS ecosystem is indispensable to Google.
  • The estimated $3 billion payment from Google helps pay for the estimated $3 billion that Apple is spending annually on self-driving cars and Augmented Reality research.
  • In spite posting a new high last week, AAPL still has a bullish one-year algorithmic forecast. This stock could still post a new 52-week within the next 12 months.

An analyst from Bernstein reported earlier this month that Apple (AAPL) could have gotten $3 billion  from Google (GOOG) in FY 2017. This reported $3 billion payment is in exchange for Google retaining its right to be the default search engine on Apple’s smartphones and tablets. The $3 billion estimated annual payment from Google helps finance the estimated $3 billion that Apple is spending on Artificial Intelligence and Augmented Reality research.

It was revealed  in 2014 that Google paid $1 billion per year to Apple but the previous deal expired in early 2015.

Google obviously offered more money to Apple to beat Microsoft’s (MSFT) Bing. Google will continue to monetize mobile search engine queries of iPhone/iPad users for many years to come. Yes, Apple doesn’t have a search engine or a robust mobile advertising services platform, but it still is a beneficiary of the $22.18 billion/year U.S. mobile search advertising industry.

apple stock predictions

Source: https://www.invespcro.com

Apple’s has obvious long-term economic benefits because Google’s search engine accounts for 95% of the U.S. paid search advertising on smartphones.

Why Investors Should Really Care

In the U.S., 75% of Google’s search engine advertising revenue is generated from iOS devices. It is only fair that Apple is now reportedly getting $3 billion per year from Google. Getting a larger share of the mobile search advertising revenue from Google is a small but important tailwind for AAPL. Google’s long-term advertising success has trickle down benefits to Apple.

apple stock predictions

Source: https://www.invespcro.com

The deal between Google and Apple might also be pro-rated based on Google’s total annual mobile search advertising revenue on the iOS platform. In short, Apple’s annual payment from Google could also grow larger than $3 billion in the coming years. Google gained $11.45 billion in U.S. mobile search advertising last year. Its estimated revenue will grow to $13.74 billion this year. I believe Apple will accordingly get a higher annual payment from Google for the next succeeding years.

Google’s willingness to pay $3 billion+++ per year to keep its default search engine status fortified the importance of the iOS ecosystem to the mobile advertising industry. Apple’s hundreds of millions of iPhone/iPad users belong, more often than not, to the middle-class and upper-class sectors of consumers. Google therefore has very compelling reasons to keep paying Apple big money to retain its default search engine status on mobile Safari.

$3 Billion Is A Lot Of R&D Money

Apple has decided to postpone indefinitely its ambition to build its consumer-grade self-driving cars. However, the company is still intent on researching and developing software and the cloud platform for autonomous driving cars. The $3 billion search engine-related payment from Google is a lot of money to finance development of this venture.

Going forward, Apple needs to spend big money on R&D to accelerate its software-based and Artificial Intelligence-enhanced self-driving car technologies to keep up with Google, Nvidia (NVDA), and Baidu (BIDU). The more money and manpower it can pour on this segment, the faster it could catch up with the leaders. Intel (INTC) paid more than $16 billioin for Mobileye just to boost its footprint in self-driving cars.

The autonomous vehicle business is definitely a new fashionable tech growth industry that Apple must get involved in quickly. The $3 billion/year from Google could also help Apple fund more third-party acquisitions to improve its car-related Artificial Intelligence efforts.

Apple will also probably have to research car-specific processors and sensors to complement its software for self-driving vehicles. Nvidia, Mobileye, and Qualcomm (QCOM) are years ahead when it comes to car-centric processors. I do not think Apple can build its proprietary software/cloud platform for self-driving cars without its own proprietary processors/sensors.

Conclusion

Getting $3 billion/year from Google is not going to move Apple’s stock. However, it could accelerate Apple’s research on Augmented Reality and self-driving car technologies. These two developing are future diversification areas for Apple. Apple cannot forever rely on its iPhone revenue to propel its future growth. It needs to get involved on the new tech fad, self-driving cars and AR. Riding on what’s popular helps motivate investors to remain bullish on AAPL.

AAPL already posted a new record high of $162.51 last week.  However, next month could deliver the iPhone 8 that everybody dreamed about. Apple coming up with a real major upgrade to the iPhone 7 next month could propel the stock to a new 52-week high. It could even hit $170 if Tim Cook announces there would be enough global supply for the iPhone 8 before September ends.

AAPL remains a buy. It has outperformed Google’s YTD return. AAPL’s YTD gain could hit +42% after 2017 ends. I will remain long AAPL as long as Warren Buffett remains long AAPL.

apple stock predictions

(Source: Morningstar)

My bullish outlook for Apple is complemented by the very positive one-year algorithmic forecast from I Know First. Staying long or buying more AAPL shares (and keeping them for one year or more)  could turn out to be rewarding for patient investors.

apple stock predictions

Past I Know First Forecast Success with AAPL

I Know First’s algorithm has made accurate predictions on AAPL in the past, such as its bullish forecast published on January 17, 2017. In the article, it explains that despite the critics and the tough competition Apple had to deal with, the company succeeds to impose its brand as a key player in its field. The bullish signal identified by the algorithm is strengthened by different facts. Since the forecast’s release, the stock has increased by 34.22%.Apple Stock Predictions

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

apple stock predictions


Nvidia stock forecast


 

Apple Stock News: Apple Focuses on Autonomous Car Technology

Apple Stock News

For the latest Apple Stock News, AAPL closed at $145.32 on Monday, June 12th, 2017. It had a loss of 2.46% from its previous close of $148.98 per share.

Apple Stock News

In an interview on Bloomberg Television, Apple CEO Tim Cook unveiled the company’s plans to focus on developing autonomous systems for driverless cars. Previously, Apple had been secretive about its specific direction in its autonomous vehicle plans.

During this interview, Cook specified that Apple is concentrating on researching the self-driving technology. Furthermore, he views autonomous systems as a core technology that can potentially have numerous applications outside of self-driving vehicles. Cook has expressed that building the software is Apple’s main focus. However, he did not confirm whether the company had explicit plans to manufacture its own car.

Apple’s interest in automotive technology and automated systems comes as no surprise as photos of the company’s autonomous vehicle test drives had emerged in April. California authorities had granted Apple mission to test vehicles in March. Apple’s car team, internally known as “Project Titan,” formed in 2014. It has since then scaled back its ambitions, prioritizing the underlying software behind driverless cars over building its own car.

Cook’s statement falls in line with Apple’s ongoing investment in research related to machine learning and automation and their potential in many fields such as transportation.

Keep checking back for more news regarding AAPL. For Full AAPL forecasts and investment advice by our state of the art algorithm click here.

Apple Stock News: Project Titan To Be Tested in California

Apple Stock News

For the latest Apple Stock News, AAPL closed at $141.05 on Friday, April 7, 2017. It had a loss of 0.53% from its previous close of $141.80 per share.

Apple Stock News

Whilst The Fate of Furious is now on screen, exciting news for Apple were revealed. The Department of Motor Vehicles now allowed three vehicles from different companies to test self-driving cars on public roads. And Apple was among them. Self-driving cars are not new. Apple has been working on project Titan. Apple has been testing its autonomous technologies in unmarked labs, and more particularly in Sunnyvale, CA. The deadline given by the company to its employees to prove the feasibility of the project is the end of 2017.

In October, the team made changes to shift the strategy of project Titan. As always, most of it was secret, and the company didn’t reveal its plans. Well, today we now know more about it. Therefore, Apple decided to focus on autonomous software rather than developing its own self-driving car. However, many accidents occurred in the past and the rules to test self-driving cars are very strict. Thus, any companies willing to test their product on the Californian roads must previously apply to the California DMV (Silicon Valley Business Journal).

Keep checking back for more news regarding AAPL. For Full AAPL forecasts and investment advice by our state of the art algorithm click here.

Apple Stock News: Scaling Back Project Titan Auto Manufacturing Plans

Apple Stock News

For the latest Apple Stock News, AAPL closed at $117.55 on Monday, October 18th, with a 0.18% gain, or $0.21 from its previous close of $117.34 per share. Shares are currently trading at a pre-market open of $118.36 a 0.69%, a gain from its previous closing.

Shares have remained at par and constant over the past week, while up 3% over the past month. Today, Apple Inc. had announced that they plan on scaling back Project Titan, their ambitious automotive plans. Due to a lack of leadership direction, bottleneck and supply issues in the automotive industry, Apple has decided to drastically scale back its sights. Though they have laid off hundreds of workers, they have hired others, placing a greater emphasis on working towards AI-based autonomous driving capabilities.

Apple Stock News

Realizing that it would face tremendous capital inefficiencies as it struggles to enter supply agreements with auto manufacturing, it now turns away from building actual cars. It now plans on focusing on the software strategy route, similar to Alphabet (Google’s parent company). Their ambitions are still high, as they seek to diversify from other products, ie the famous iPhone, and into a more growing industry. The auto manufacturing industry is expected to be worth over $6 trillion by 2020, according to McKinsey.

Though they are scaling back greatly from their original goals, investors are pleased with the news, given they are up in pre-market trading. This can be due to the fact that over the past year and a half, there has been much internal strife revolving around Project Titan, as well as high costs with higher expected costs for capex. Investing in an actual premium Apple branded software, can lead to a higher margin of profitability, if it is able to pair with leading auto manufacturers in the industry.

Keep checking back for more news regarding AAPL. For Full AAPL forecasts and investment advice by our state of the art algorithm click here.