Apple Is Big Enough to Absorb a $10 Billion Failure

Apple (AAPL) is not going to disrupt the auto market. The tech giant spent about 10 years on a research-and-development project to make electric and self-driving car. It called the effort "Project Titan." [Chaikin PowerFeed]( Apple Is Big Enough to Absorb a $10 Billion Failure By Marc Gerstein, director of research, Chaikin Analytics Apple (AAPL) is not going to disrupt the auto market. The tech giant spent about 10 years on a research-and-development project to make electric and self-driving car. It called the effort "Project Titan." Now, Apple didn't formally announce the project. But there have been plenty of rumors over the years. These included numbers of employees working on the project and types of designs. And late last month, Project Titan made headline news. On February 27, reports surfaced that Apple Chief Operating Officer Jeff Williams and project leader Kevin Lynch told employees that the effort would be scrapped. And now, we're learning a lot more about it... Back in 2014, Alphabet's (GOOGL) autonomous-driving prototype had already dazzled Silicon Valley. Many folks there assumed autonomous driving would eventually be popular everywhere. And in theory, this market could have been just right for Apple. Its playbook often included reinventing existing products and using its technology to take them to new heights. And given its size at the time, Apple thought it needed something like the large $2 trillion transportation market to make a big difference in expanding its business. Meanwhile, Apple's engineers had finished developing the Apple Watch. They wanted to work on something new. And CEO Tim Cook worried that many of them would leave Apple and go to Tesla (TSLA). The solution? Reinvent the automobile and take it to new levels using Apple technology – hence the birth of Project Titan. The project seemed to check all the boxes. But in reality, it didn't... Recommended Links: ["The Most Valuable Information You Will Ever Get For Free In Your Life."]( Stansberry Research founder, Porter Stansberry, famously predicted the fall of the iconic General Motors... and the rise of bitcoin around $10,000, before it soared past $60,000. Yet even still, he says the story he's telling on March 26th is "without a doubt" the most valuable information you will ever get for free. [Click here for details while it's online](. [Something BIG's about to happen in America]( The REAL truth behind what's happening in America right now is even worse than you thought. In fact, new evidence points to a secret Election Day shakeup, involving a sleeper candidate for President nobody is talking about... a controversial Chinese-owned app... and the most famous celebrity in the world today. [You must see the details for yourself](. For one thing, some executives weren't convinced. Chief Financial Officer Luca Maestri was against it. He knew from his prior stint at General Motors' (GM) European division that this was a very low-margin business. Maestri had a point. Apple's five-year average operating margin was 28.2%. The auto industry median margin was 7.7%. Craig Federighi, Apple's top software engineer, was another skeptic. So was star designer Jony Ive. And at the outset, Apple even considered buying Tesla. But Tesla CEO Elon Musk put an end to that potential deal by saying he wouldn't step down from his position. Later, in 2017, Tim Cook refused to meet Musk when he came back trying to offer Tesla to Apple. And Project Titan would suffer from indecisiveness mixed with overambition. Steve Zadesky, the project's original leader, wanted to build an electric car. That put him on the same page as those who considered buying Tesla. Bu Ive wanted a self-driving vehicle. He won. Even this didn't settle everything... Keep in mind that there are various levels of self-driving. Apple veered between Level 3 (in which humans participate in driving) and Level 5 (in which humans don't play a role in driving). Ultimately, Apple chose the most ambitious Level 5. The vehicle would have likely looked like a minivan. It would have included touchscreens folding down from the roof as controllers, piped-in external sounds, a giant TV screen, and windows that adjusted their own tint. But it wouldn't have a steering wheel. And some company insiders feared that consumers wouldn't like that. The goal was cut again in 2023. Apple would offer a less-revolutionary package. It would have a steering wheel, lane control, and cruise control. But the production cost would be about $120,000. Finally, this February, Apple gave up. All told, it spent about $10 billion on the project. Sure, $10 billion is a big number. But fortunately for Apple, the company is massive enough to absorb this hit... Keep in mind that $10 billion is only about 0.4% of the company's staggering $2.7 trillion market cap. And it's just 2.5% of trailing 12-month sales. So Apple's stock barely reacted after the reports emerged that the company was abandoning Project Titan. Between February 26 and March 1, the S&P 500 Index rose 1.3%. AAPL shares fell just 0.8% over the same time frame. Despite this, keep in mind that Apple's stock isn't totally out of the woods. And the Power Gauge shows us why... In the chart below, you can see that the stock's relative strength versus the broad market has ranged from lackluster to weak since last fall. You can also see that over the past year, the Power Gauge has been occasionally "bullish" on Apple. But it's more often been "neutral" – like it was before and after the company decided to scrap Project Titan. And as the chart shows, the Power Gauge is still "neutral" on Apple today... [Chaikin PowerFeed] This shows the benefits of size. A smaller company might have seen its shares – and Power Gauge Rating – suffer badly after such a sloppy and expensive failure. But with such a massive market cap, Apple can withstand the hit. Putting it all together, a $10 billion miss won't crush Apple. But the Power Gauge is still cautious on the company overall today... and I'll take my cues from there. Good investing, Marc Gerstein Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 +1.05% 12 18 0 S&P 500 +0.91% 192 258 47 Nasdaq +1.19% 37 50 12 Small Caps +1.94% 528 1016 365 Bonds -0.03% Consumer Discretionary +1.47% 23 24 6 — According to the Chaikin Power Bar, Large Cap stocks remain somewhat more Bullish than Small Cap stocks. Major indexes are mixed. * * * * Sector Tracker Sector movement over the last 5 days Energy +1.87% Communication +1.67% Industrials +1.53% Discretionary +1.24% Financial +1.0% Information Technology +0.44% Materials +0.36% Utilities -0.02% Staples -0.24% Health Care -0.69% Real Estate -1.74% * * * * Industry Focus Software & Services 55 71 8 Over the past 6 months, the Software & Services subsector (XSW) has outperformed the S&P 500 by +1.87%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #8 of 21 subsectors. Top Stocks [rating] RNG RingCentral, Inc. [rating] PEGA Pegasystems Inc. [rating] DOCU DocuSign, Inc. * * * * Top Movers Gainers [rating] PARA +11.8% [rating] F +4.88% [rating] CCL +4.79% [rating] RCL +4.73% [rating] UAL +4.71% Losers [rating] NDAQ -2.53% [rating] AMCR -2.45% [rating] EQIX -2.33% [rating] HSY -2.07% [rating] CLX -2.02% * * * * Earnings Report Reporting Today Rating Before Open After Close ACN DRI, FDS FDX, LULU, NKE No earnings reporting today. Earnings Surprises [rating] GIS General Mills, Inc. Q3 $1.17 Beat by $0.12 [rating] MU Micron Technology, Inc. Q2 $-0.95 Beat by $0.06 [rating] VERA Vera Therapeutics, Inc. Q4 $-0.45 Beat by $0.09 * * * * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, [click here](. You’re receiving this e-mail at {EMAIL}. For questions about your account or to speak with customer service, call [+1 (877) 697-6783 (U.S.)](tel:18776976783), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. 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