Mobile Payments to Boost the Big Technology Stocks

Equity analysts think that Apple's new payment solution will boost Apple, merchants, card issuers, and networks - with eBay, Facebook and Google bound to follow suit

Brian Colello, CPA 5 November, 2014 | 10:26AM
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Apple's (AAPL) mobile payment solution, Apple Pay, should emerge as a game-changer in commerce, even though it may take many years before reaching full adoption by merchants and consumers. In this report, we provide an in-depth analysis of the Apple Pay solution and how it fits within the existing credit card ecosystem today. We think that Apple Pay will create a ripple effect for all parties - Apple, merchants, card issuers, and networks - even if our medium-term estimates of Apple Pay's potential contribution to the company's top line appear somewhat muted.

For Apple, we view Apple Pay as a hard-to-replicate service that will generate incremental earnings, but more important, raise switching costs around the iOS platform. The rise of Apple Pay may have only a limited effect on the credit card ecosystem, as lower fraud costs to issuers are likely to be paid out to Apple, all while credit-based transactions rise modestly.

We still view eBay (EBAY) as a best stock idea and the most actionable way to invest in the mobile payment space, and we tend to view Apple Pay as an opportunity for PayPal and its Braintree subsidiary, rather than a threat. Finally, Google (GOOG) and Facebook (FB), in particular, have the necessary assets in cloud and mobile technologies to become relevant in mobile payments.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Alphabet Inc Class C2,793.44 USD0.65Rating
Apple Inc149.32 USD0.46Rating
eBay Inc78.50 USD-2.57Rating
Facebook Inc A315.81 USD-3.92Rating

About Author

Brian Colello, CPA  is a senior stock analyst with Morningstar.