By Chloe Lutts
Dick Davis Digests
Stock Market Crash Course Video
Paying with Your Phone
A Mobile Payments Stock
Stock Market Video The Three Monsters Under Growth Investors'
In Case of Doubt Sound Convincing
Last week the Fed announced more stimulus as expected, and
though some thought it was already priced into the market, the
major indexes shot up anyway. In my latest Stock Market Crash
Course Video, I look at the several technical indicators to see
if the market is healthy enough to turn into a longer bull market
and I give a quick overview of our contributors' current opinion
of the market. Experts quoted include: John Bollinger, Clif
Droke and Dr. Marvin Appel and Gerald Appel.
Click here to watch the video.
Before leaving my house, I always look in my purse to make sure I
have three things: phone, wallet and keys. Thousands of people do
the same thing every day. Some day soon, though, my checklist may
be one thing shorter, as "wallet" becomes just another function
of my phone (which has already absorbed the functions of the
watch, datebook, notepad, address book, camera and music player).
Before that day, I'm sure there will be a gradual (and probably
fairly long) transition, during which I'll pay for some things
with my phone, and some with a credit card or cash. I haven't
actually paid for anything with my phone yet, but I expect I will
soon, as more and more stores make it an option.
One of the leaders on that front is Starbucks (
), which recently partnered with mobile-payments startup Square
to introduce its technology to Starbucks stores. The coffee giant
made a $25 million investment in Square earlier this month, and
will soon begin using Square technology to let customers pay with
their phones in 7,000 Starbucks stores.
Starbucks already has its own app that customers can use to pay
for their coffee; it processes one million transactions a week.
And Square is already well-known for its namesake product: a
little white square that plugs into a phone's or tablet's
headphone jack and lets (mostly small) merchants swipe customer
credit cards. Last week I bought a cappuccino and croissant at a
Brooklyn bakery that has replaced its cash register with an iPad
and Square plugin. After swiping my card through the Square
device, the cashier pivoted the iPad so I could sign the screen
using my finger. Square also processes the credit card
transactions for the merchant, using the iPad or phone's Internet
connection, for a small fee.
In the Starbucks partnership, Square will process the
transactions, increasing its scale significantly. But don't
expect to see the little white Square devices at your Starbucks.
According to The New York Times, Starbucks will begin letting
customers pay with Square's mobile payment app simply by telling
a cashier their name. The customer is technically paying with
their phone, but they don't have to wave it in front of a
machine, show it to the cashier, or even take it out of their
pocket or bag. Instead, the cash register automatically detects
when a customer with the Square app on their phone walks into the
store. Their information, including a photo, pops up on the
register's screen. When they get to the register to pay for their
purchase, the cashier can ask for a name, compare their picture
to their actual face, and then simply click their profile to
process the payment. Then Square charges the purchase to the
credit card the customer has linked to their account (using the
Of course, Square has competition. McDonald's (
) confirmed just yesterday that customers at 30 restaurants in
France can now place their order and pay using a mobile app. The
payment system is powered by PayPal, which has apparently been
trying to make the jump from the online world (where paying with
PayPal is very common) into the real world for some time: it has
also teamed up with 15 other retailers, including Home Depot and
Office Depot, to let customers pay with their PayPal accounts in
) is also eager to be a force in the mobile payments space.
Google Wallet users with a compatible Android phone can pay with
their phones at retailers with NFC readers (near-field
communications, like MasterCard PayPass readers). They just wave
their phone in front of the reader and the credit card connected
to their Google Wallet account is charged.
At this point, it's anyone's guess which system will become
dominant. Square's seems most elegant at the moment, but PayPal
and Google both have powerful alliances, including with VeriFone
). And of course PayPal is owned by
may actually be the best investment leveraged to mobile payments
at this time; the stock is strong. (I still like PAY's story, but
the stock is dead in the water for now. Square is private.)
And EBAY was recommended in the latest Investment Digest, in a
follow up from Wall Street Stock Forecaster Editor Patrick
McKeough. McKeough's EBAY recommendation was originally in the
Investment Digest in January, with the stock around trading $31.
Earlier this month, he wrote an update on the stock, now trading
around $46, writing:
"In the three months ended June 30, 2012, eBay's revenue rose
23.1%, to $3.4 billion from $2.8 billion a year earlier. Revenue
rose 26.5% at PayPal and 9.1% at the auction sites. Earnings rose
15.7%, to $730 million from $631 million. Per-share earnings rose
16.7%, to $0.56 from $0.48, on fewer shares outstanding.
"The stock has gained 39% since we first recommended it at $31 in
our December 2010 issue. It now trades at 20.8 times eBay's
projected 2012 earnings of $2.07 a share. That's still a
reasonable P/E ratio in light of its rising earnings and PayPal's
growth. eBay is a buy."--Patrick McKeough, Wall Street Stock
Forecaster, August 2012
Of course, you can also participate in the move to mobile
payments by signing up for the Pay with Square app, Google Wallet
or PayPal and trying it out at a store near you. If you do, let
me know how it goes!
Wishing you success in your investing and beyond,
Dick Davis Digests