Apple Inc. (NASDAQ:AAPL) is no stranger to the hype machine, or fanboy shareholders.
But after two separate morons stood up at the recent AAPL stock holder meeting, with two separate proposals that Apple purchase electric vehicle icon Tesla Motors Inc (NASDAQ:TSLA), we have reached a new level of crazy even for the house that Jobs built.
The origins of this buyout proposal — which, by the way, is completely ludicrous and will never happen — comes from reports that AAPL is building its own automobile team.
It’s not necessarily building its own electric car, mind you. It just has a team working on things like coming up with a design and researching materials.
Let’s look past the fact that the formation of a team doesn’t mean Apple is actually building a car; AAPL stock execs and designers could simply be interested in software interfaces or other technology that goes into third-party autos.
Because even if Apple is indeed building its own iCar, the fact remains that it will never buy Tesla.
Never ever ever.
Never.
Apple and Tesla, By the Numbers
To begin with, let’s look at Apple’s numbers to see just how insignificant the entirety of TSLA stock and its business operations would be to the bottom line of Apple Inc.:
Tesla Revenue Is 1% of Apple’s: Apple racked up $74.6 billion in revenue last quarter. In roughly the same period, iconic electric car company Tesla Motors recorded $957 million in automotive sales. So even if Apple could instantly subsume Tesla, those sales would add a measly 1.3% to total revenue next quarter.
“Other Products” Are Nearly 3x Tesla Sales: Lost amid the small potatoes of Apple’s earnings report is its “other products” line item — things like Apple TV and Beats headphones. This division accounted for almost $2.7 billion in total sales last quarter. In short, the Tesla/Apple Car would have to nearly triple its sales to be a peer with this “other” line item on the balance sheet.
TSLA Stock Is All in Musk’s Hands: Tesla founder Elon Musk owns some 35.5 million shares for 27% of the company, and is a very active entrepreneur that has never telegraphed plans to simply cash out or relinquish control.
Look at the Price Tag: Let’s not forget the same buy-the-narrative fanaticism that infects AAPL stock has pushed Tesla to sky-high valuations itself; a mere 10% premium would require more than $26 billion from Apple at current prices! Anyone who thinks that will happen for a 1.3% revenue bump has been drinking too much Silicon Valley Kool-Aid.
Tech fanatics can spin a nice tale and Apple fanboys can gush all they want on Twitter, but the bottom line for investors always comes back to the bottom line.
And when you look at the idea of an Apple car, either via a TSLA stock buyout or simply in-house production, it is impossible to believe any efforts will ever result in any meaningful value to shareholders in the next several years … no matter how breathless the blogosphere gets right now.
So forget the iCar. Forget a Tesla buyout, too.
If you’re considering buying into Apple stock, focus more on the prospects of the iPhone, which accounted for two-thirds of revenue last quarter. Or decide whether you think the tens of billions of dollars being spent on dividends and buybacks are driving real value to shareholders.
And if you want to invest in “innovators,” make sure you are buying something of substance and not just a lot of hot air.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
