Analyzing the potential benefit of an Apple payment ecosystem

“Over the past few weeks, more and more ‘sources’ have claimed that Apple is going to introduce a mobile payment feature with its new iPhone 6 during its event on September 9th,” Jonathan Fishman writes for Seeking Alpha. “Although we never know for certain what exactly Apple is planning to unveil, I would like to offer a logically-driven analysis about the potential impact of a mobile payment feature. The effects of such a feature on Apple’s earnings would be gradual, but mobile payments would have the potential to truly be a game changer.”

“There are around 800 million iTunes accounts in the world today, most of them linked to credit cards. An iTunes account would probably not be enough to make a payment; you’ll also need an NFC-enabled iOS device, such as an iPhone or an iWatch,” Fishman writes. “That will make the rollout of the payment system more gradual. In the last quarter of 2014, I estimate around 60M iPhone sales. In 2015, I estimate 200M NFC-enabled iPhones and 100M iWatches. In 2016, I estimate 240M iPhones and 120M iWatches.”

“All together, the mobile payment business could generate around $28.7B in annual net revenues for Apple by the end of 2016. These revenues will come in very high profit margins, given their very low cost of sales. I estimate that Apple could make 40% in net profits for each revenue dollar,” Fishman writes. “In this case, Apple’s payment business run-rate could reach $11.5B in net profits by year’s end 2016, which would translate into ~$1.90 per share. Using Apple’s current PE of ~16, this business alone should be worth $30.4/share.”

Read more in the full article here.

Related articles:
Apple stock at least 6% upside from mobile payments, potentially much more – September 2, 2014
iWallet: Apple teaming up with Amex, Visa, MasterCard on iPhone payments – September 1, 2014
NFC chip from NXP confirmed for Apple’s ‘iPhone 6′ – August 29, 2014
Apple may soon deliver the watershed moment for mobile payments – August 29, 2014
Apple working with NXP to bring pay-by-touch NFC technology in new iPhone – August 29, 2014
Apple’s ‘iPhone 6′ will include NFC mobile payments, sources say – August 28, 2014
More evidence of NFC support for both iPhone 6 models – August 27, 2014
Schematic suggests NFC chip in ‘iPhone 6,’ amount of RAM remains unknown – August 18, 2014
Apple’s iPhone 6 line will sport new A8 chip, faster Wi-Fi, improved Touch ID, and NFC – August 6, 2014
NFC, wireless charging, improved LTE rumored for Apple’s ‘iPhone 6′ – June 9, 2014
Apple patent reveals new iPhone antenna that adds NFC – May 22, 2014

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