Throw away your wallet. Toss out all those heavy, antiquated
coins. Burn your checkbook. Cut up your credit cards.
But make sure you keep your mobile phone.
It's how you soon may pay for almost everything you buy using
a method some call the "mobile wallet" and others term "mobile
money" but is most commonly known as mobile payment
Mobile payment transactions are exploding. According to a
report by Gartner Research, these types of payments totaled
roughly $171.5 billion in 2012, a 62% rise from $105.9 billion in
2011. In 2012, roughly 212 million people worldwide made mobile
payments, up 32% from nearly 160 million users in 2011.
More importantly, Gartner expects mobile transactions will
grow at an average pace of 42% a year. By 2016, the firm
forecasts the mobile transaction market will be worth $617
billion with 448 million global users.
This amazing growth outlook means tremendous opportunity for
mobile payment service providers. Traders tapping into the trend
now could also make stellar returns.
Of the publicly traded mobile payment solutions companies, the
one I like best is
NXP Semiconductors (Nasdaq:
based on its solid chart and increasing revenue and profits.
The hardware manufacturer has a specialized chip that enables
mobile devices to communicate with each other in a close range,
allowing the secure transmission of payment information. This
near-field communication (NFC) chip should be a strong growth
As my colleague Andy Obermueller pointed out in a
, sales of NXP's NFC chips grew 19% in 2011 and 41% in 2012.
Merrill Lynch expects the company's chip sales will increase an
additional 30% this year. By 2015, NFC chip sales are expected to
account for 35% of the company's total revenue. (Another
colleague of mine, David Goodboy, recently had
an interesting take
on an unexpected potential rival to NXP.)
It's clear that as mobile payment technology becomes
increasingly commonplace, demand for NXP's chips could surge.
From a technical perspective, NXPI's chart is bullish.
Rising off a low of $14.27 in December 2011, shares formed a
major uptrend, rising almost 200% to date.
Early this year, the stock hit a multi-year high at $32.99,
but encountered resistance at this level. By April, shares had
dipped to $24.66, a support level marked by the intersection of
the major uptrend line.
Holding support, NXPI clawed its way back. By July, shares
once again hovered near $32.99 resistance. In August, the stock
surged through this resistance level, bullishly breaking a
NXPI went on to hit a high of $39.46, but could not move
further. From late August through most of September, shares
traded in a narrow range between support near $36 and resistance
However, following recently reported upbeat third-quarter
results, shares pushed past $39.46 resistance. The stock is now
trading near its all-time high at just over $42. With no overhead
resistance in sight, shares could soar. Some analysts have a
price target as high as $60. At current levels, this target
presents traders with 40%-plus potential returns.
The bullish technical outlook is supported by strong
Driven by growth in secure identification products,
fourth-quarter revenue is expected to increase 13% from the same
period last year, to $1.27 billion. For the full 2013 year,
analysts expect increased chip demand will push sales 10% higher
to $4.79 billion.
The earnings outlook is similar. Analysts expect
fourth-quarter earnings will nearly double to $0.95 per share
from $0.50 in the comparable year-earlier quarter. For the full
2013 year, analysts project earnings will increase 90%, to $3.23
In addition to a strong growth outlook, the company appears
attractively valued based on its five-year expected PEG ratio
(price-to-earnings ratio divided by earnings growth rate) of 0.4.
Typically, a PEG of 1 or less shows value.
Risks to Consider:
While mobile payment may be where many financial transactions
are headed, adoption could be slower than anticipated. Demand for
hardware enabling mobile payment data communication could slow,
negatively affecting the company's growth outlook. However, NXPI
is diversified, and innovative technology solutions should drive
Action to Take -->
-- Buy NXPI at the market price
-- Set stop-loss at $36.01, slightly below important support
-- Set initial price target at $59.99 for a potential 42% gain by
This article was originally published at
'Mobile Wallet' Stock Could Land Traders
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