Since hitting a 52-week low of $385.10 on April 19, shares of
) have recovered somewhat and have stayed above $450 thus far in
It seems like investors are slowly but surely regaining their
confidence in the Cupertino, California-based company, whose stock
had taken a hammering in the months leading up to April 19 because
of falling gross margins, a perceived lack of new ideas and
increased competition from Korean rival
"I think a year ago when Apple stock was on its sort of unstoppable
run-up toward $700 per share, a lot of people on Wall Street and
elsewhere had expectations about the company that have proven to be
a bit unrealistic. People really expected that Apple was going to
introduce some kind of new blockbuster product, probably a
television set, and that this new product category would open up a
new multi-billion-dollar line of business for Apple. Obviously,
that hasn't happened," explained
technology reporter Steve Henn on the precipitous drop of Apple
shares earlier this year.
"[But Apple's] not in trouble. You know, Apple's iPhone business
alone is bigger than all of
), and it's growing faster than Amazon," Henn continued.
Indeed, investors seem to be recognizing that Apple is still an
enormously profitable company with an incredible $140 billion cash
hoard, and that iPhone and iPad sales are still going from strength
And for all the talk about the iWatch or Apple TV being the next
game-changing innovation, it might be software innovation in the
realm of mobile payments that proves to be Apple's future stock
Apple's Passbook app, a digital wallet that stores your loyalty
cards and vouchers, was the company's first venture into the mobile
The mobile payments space is now led by
) PayPal and Square, with
) Wallet and Isis, a joint venture between
(VZ), gaining little traction.
"The difficulties in offering a mobile payment solution is that it
requires the same technological implementation at both the handset
and retail level, which is largely why Google's mobile payment
solutions (Google offers NFC [near field communication]
capabilities in its Android Nexus S smartphone) haven't taken off
yet," Adam Grunwerg, editor at
, tells Minyanville.
But Apple already possesses an ultimate trump card over Google and
other competitors: the ability to leverage 500 million iTunes
accounts with credit cards.
"Apple's iTunes platform boasts over 500 million accounts with a
credit card on file, and if they can begin offering fingerprint
authorization on their new iPhone, which is very likely given their
acquisition of [mobile security firm] AuthenTec last year, then
they'll have a huge advantage in reducing fraud transactions and
activity, which makes up 5-20% of merchants costs," Grunwerg
elaborates. "Furthermore, charge backs and fraud activity are the
things that have prevented Apple from offering mobile payment
solutions in the past, according to Dan Schatt at PayPal.
Fingerprint identification would reduce most of these."
Given the size of Apple's user base and the ability to save money
on reduced fraud activity, merchants should be more easily
convinced to adopt Apple's technology when it is introduced than
they have been thus far with NFC-based solutions.
A successful "iPay" service could portend doom for the likes of
(AXP) because Apple is likely to create a platform that would
bypass them. This way, it can keep the transaction fees it would
otherwise pay credit card companies.
from Citi projected that mobile payments "could see a transaction
value of $1 [trillion] by 2016." If Apple could capture just 5% of
the market, it would process some $50 billion in transactions.
Assuming it charges a 1% fee for each transaction, that's a cool
$500 million in revenue per year.
It all sounds too good to be true, of course, and it could be if
Apple doesn't get the execution right. Perhaps that's why CEO Tim
Cook has been downplaying expectations that a mobile payments
solution is coming anytime soon, saying that the line of business
is "in its infancy."
"I think it's just getting started. Just out of the starting
block," the Apple CEO said on an earnings call in April.
It's probably wise that Cook is being extra cautious about mobile
payments. Consumer trust and confidence in the security of the
system is critical for any mobile payments platform to succeed, and
given Apple's recent track record with services - Apple Maps,
anyone? - it would do well to take its time and come up with
something only when it's been perfected.
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