Will Apple buy Rivian? 1 Wall Street analysts think it should.

Electric vehicles (EVs) are one of the cornerstone technologies of the sustainability movement. Not surprisingly, most traditional car manufacturers ford, general motorsand Volkswagenhas been experimenting with battery-powered vehicles.

But beyond traditional automakers, some big tech companies have expressed interest in entering the EV market. In recent years, apple (AAPL -0.60%) The company is reportedly working on developing its own EV. In many ways this makes sense. Apple has a long history of innovation, especially when it comes to consumer electronics. But just this week, news broke that Apple is abandoning its EV efforts, dubbed Project Titan.

Does this mean Apple has given up on its EV ambitions forever?

interesting ideas on wall street

Deepwater Asset Management’s Gene Munster is one of Wall Street’s most respected technology analysts. Project His Titan seems to have been consigned to the dustbin of tech industry history, but Mr. Munster has come up with an interesting idea.

In a discussion on CNBC on Tuesday, Munster suggested Apple should make the acquisition. Rivian. This is interesting for several reasons.

First, Rivian has had some success in the competitive EV industry. However, the company seems stuck in a “one step forward, two steps back” paradigm. In other words, every time there appears to be a fresh start, new problems arise.

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Apple and Rivian both need growth

On one side of the equation is Apple, whose mainstay consumer electronics business is struggling. The company’s revenue has consistently declined as consumers wait longer to upgrade products such as iPhones, iPads, laptops and wearable devices.

Apple’s services business is accelerating nicely, but its growth isn’t enough to offset slow hardware sales. So Apple needs more growth drivers.

On the other side of the equation sits Rivian. In 2023, 57,232 vehicles were produced, an increase of 135% over the previous year. That’s encouraging, but it’s not all smooth sailing from here.

At the company’s fourth-quarter results conference, management shocked investors by predicting that production would be roughly flat in 2024.

Apple and Rivian both share similar issues. In an economic environment defined by higher interest rates than consumers have been dealing with for years and the ripple effects of recent high inflation, demand for luxury consumer goods is not as strong.

Both companies are eager to accelerate growth and excite investors, but are Apple and Rivian a match made in heaven?

Should Apple buy Rivian?

On the surface, I completely understand Munster’s proposal.

For Rivian, the deal with Apple could be transformative. As part of Apple, the company will immediately have access to a large team of engineers and technicians, and the luxury of Apple funding. Meanwhile, Apple will gain access to the EV market and add yet another product to its stable ecosystem.

Apple currently has more than $73 billion in cash and equivalents on its balance sheet. Rivian’s market capitalization is approximately $11 billion. Given these parameters, it’s clear that Apple could acquire Rivian in an all-cash deal at a fairly generous premium and still have plenty of pocket change left over.

But a closer look at Apple’s history with acquisitions puts the possibility of such a hypothetical deal into reality in a different light.

Apple’s biggest acquisition to date was a $3 billion deal with headphone company Beats Electronics in 2014. Across the 10 major acquisitions, Apple spent about $7.4 billion.

These data points make it clear that Apple rarely pursues big-ticket acquisitions. So while the idea of ​​the company acquiring Rivian is interesting, and such a deal might even make strategic sense for both companies, I see it as highly unlikely. Big acquisitions aren’t part of Apple’s DNA, and I don’t see that changing anytime soon.