Stock Market

Bye-Bye Apple Car: Is This a Sign to Buy, Sell or Hold AAPL Stock Now?

I’ll be the first to admit that I’m an Apple (NASDAQ:AAPL) fan. My wife and I own at least 10 Apple products, with more to come, I’m sure. However, regarding AAPL stock, I’m afraid the company’s car debacle is a sign it might be too scared to fail. 

This reluctance is not the hallmark of a tech innovator. Not by a long shot. 

Considering how much Microsoft (NASDAQ:MSFT) has changed since Satya Nadella became CEO in February 2014, the contrast in the two companies’ pace of product development is staggering. Worse still, Nadella wasn’t afraid to go out and make a big buy — Activision Blizzard for $69 billion — when he and his management knew its own gaming business was slightly underwhelming. 

I’m a fan of Tim Cook’s. I think he brought stability to Apple after Steve Jobs could no longer do the job and ultimately died, but he’s never been accused of being a risk-taker or innovator. 

With Project Titan officially scrapped after 10 years of behind-the-curtain work, investors are looking squarely at AI and wondering if Apple’s about to lay another egg when it matters most. 

I don’t know about you, but I’m starting to feel Tim Cook and Apple are afraid to fail. If that’s the case, an investment in Apple is no longer the slam dunk it’s been for the past 13 years that Cook has been in the driver’s seat in Cupertino. 

Here are three signs the Apple Car debacle might be the tip of the iceberg. 

Apple Car: Why Cancel Now?

Maybe I’m off base, but I don’t think Elon Musk would ever have considered quitting pushing Tesla’s (NASDAQ:TSLA) development if things didn’t progress as fast as they ultimately did. 

Musk joined Tesla in 2004 with his $30 million check and the Chairman’s role. The Roadster came out four years later. Musk became CEO in October 2008, firing 25% of the staff. In 2012, it brought out the Model S, its first commercial vehicle. It faced significant cash crunches for the next seven years until it generated positive free cash flow for the first time of $1.01 billion in 2019.

That’s 15 years to get to positive free cash flow. If it would have taken 20, Musk would have found a way. I’m not saying he’s a saint, but he is relentless. 

I’m not sure Tim Cook has the stomach for such a marathon. 

Yes, he allowed Project Titan to carry on for a decade, but it’s a lot different when you have products like the iPhone generating $50 billion or more of positive free cash flow.

For the sake of AAPL stock holders, the why better be that AI provides a much higher return on investment without nearly as much hand-wringing about sales. Because if it’s not that, but fear of killing the golden goose (free cash flow), AAPL stock is sunk. 

Is Apple Unable to Partner Well?

Wired.com contributor Aarian Marshall does a good job explaining why the Apple Car died. 

“Any tech company hoping to break into the automotive space ‘needs partnerships,’ says K. Venkatesh Prasad, the senior vice president and chief innovation officer at the Center for Automotive Research, a nonprofit research organization. The same is true for any automaker hoping to compete with the tech natives, he says,” Marshall wrote on Feb. 28. 

Marshall says that Apple could not get an actual automaker to partner with, which, he implies, was a big reason Cook pulled the plug on the project. 

But what’s strange is Marshall goes on to say that Apple CarPlay has found or will find its way into all the major automaker’s vehicles, suggesting that Project Titan might be dead, but that doesn’t mean the company’s ambitions in the automotive industry are dead in the water, far from it. 

What to Think If You Don’t Own Apple Stock?

On March 1, Goldman Sachs removed Apple from its “U.S. Conviction List – Directors’ Cut.” While the analysts didn’t say why it dropped Apple, you have to wonder if the Apple Car debacle had something to do with it. 

Despite the cut, the firm remains relatively upbeat about an Apple investment. 

“Analysts see Apple’s installed base growth, secular growth in services, and new product innovation as more than offsetting cyclical headwinds to product revenue, such as a reduced iPhone unit demand from a lengthening replacement cycle and reduced consumer demand for the PC & tablet category,” Investing.com reported Goldman Sachs’ comments from its note to clients. 

If you own Apple stock, I would not sell it. If you don’t, I’d wait to see if you can get a better entry point by putting off your purchase until more information is known about its AI endeavors and how they relate to future revenue. 

In the long term, I do think Apple’s a buy. However, the end of Project Titan should make investors question the company’s tolerance for failure. That’s an innovation killer. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.