To be sure, the e-commerce giant Amazon has made promising forays into health care, groceries, and even brick-and-mortar with its purchase of Whole Foods. However, Munster, a former Apple analyst on Wall Street, said that both Apple and electric car company Tesla are the “two biggest opportunities over the next few years.”
“I think your money is better spent on Apple or Tesla,” Munster told Yahoo Finance’s Alexis Christoforous on Wednesday.
Both companies are looking ahead to growth in fields outside of what they’ve become known for: Tesla is expanding beyond just electric cars, while Apple is now more than simply a device maker.
‘The Chinese government gives some generous subsidies’
Tesla stock sold off sharply last week amid production delays for its Model 3 vehicles, and the company has been burning through cash. Elon Musk founded Tesla in 2003, and the company is primarily known for producing electric vehicles. However, the company also makes solar panels and has a clean-energy storage business.
Munster said Wall Street does not “appreciate the scope of the company’s mission, to accelerate the world’s adoption of renewable energy.”
Tesla recently revealed plans to open a factory in China, which could ease production concerns and expand the company’s consumer base. Munster noted that China is, by far, the world’s biggest market for electric vehicles, and that Chinese consumers could buy Teslas made in China more cheaply if they were made there.
Moreover, he noted, “The Chinese government gives some generous subsidies to consumers for buying electric cars.”
Munster predicts that as Tesla ventures forward, the company “should gain market cap from not only other car makers, but energy companies as well.” As electric cars become more popular, the need for alternative power options is growing more rapidly.
Apple brings more users into its ecosystem
New products have, historically, driven growth at Apple, from the debut and growth of the Mac in the ’80s to the launches of the iPod and the iPhone. However the company’s next shift, Munster explained, will rely on Apple as a service, focusing on iCloud, app sales, and more software features, rather than leaning on hardware.
On the Loup Ventures blog, Munster previously wrote about the slow decline of the hype of the product cycle, which has sometimes led to disappointment. “Anticipation around new products will influence shares, but that influence will be shorter-lived,” he said.
Apple will no longer rely on the so-called super cycles that surround iPhone releases, according to Munster. Instead, the company’s most recent, and continued, stability is “representative of a hardware business performing increasingly like a software business.”
By integrating the service model to its business plan, Apple could reach a larger base as it provides features, such as Apple Pay and Apple Music, to more users. Future growth will rely more heavily on new product categories while still maintaining the retention and consistent sales of iPhone, Munster says. Investors can also expect higher returns as augmented reality and self-driving cars are not yet reflected in Apple’s valuation, according to Munster.
Katie Krzaczek is an associate editor at Yahoo Finance.