December 23, 2014

Doug Kass on Apple Pay and Apple's future prospects

I have read about a great deal of excitement regarding Apple Pay and the possibility that the application will be a "needle mover" for Apple.

I started using Apple Pay this week and, besides the comfort of the security issue, I see little value added to the application. I would just as well use my credit cards. 

I recognize that credit card companies like the Apple Pay product as it protects them from fraud and Apple gets only 0.15% per transaction. However, in light of the possible threat of market share inroads by Apple, one would think that the credit card providers will shortly "retaliate" with a more secure product and card offerings of their own in the not so distant future.

Even if the market is left to Apple by the credit card companies, the needle will not be moved. Try multiplying 0.15% by any reasonable sales figure and you will see why.

What am I missing here?

I will stick by my short investment case that the current product upgrade cycle, while gigantic in terms of current sales, represents the last major product upgrade cycle in quite a while and that neither the watch or Apple Pay will likely be significant incremental contributors to Apple's sales and earnings.