Reports have said Apple is working toward a deal to have a Korean manufacturer produce a car for it.
Carl Court/Getty ImagesNow here’s an idea. Maybe Apple should get into cryptocurrency-exchange business.
That one comes courtesy of RBC Capital analyst Mitch Steves, who picked up coverage of Apple shares on Monday with an Outperform rating, lifting the firm’s target for the share price to $171, from $154. Apple stock (ticker: AAPL) was off 0.6% to $135.99 in afternoon trading.
The hot topic on Apple lately has been speculation that the company is nearing a deal with Hyundai on creating an Apple Car (or maybe an iCar, MacCar, or Jobsmobile.) Steves thinks that a car might make sense eventually, but he is more intrigued by the idea that Apple could dip its toe into the cryptocurrency markets.
“When we look at Apple as an ecosystem player we note that the firm has industry-leading software, security and a 1.5B installed base [of hardware devices],” he wrote in a research note. In its recent December-quarter earnings announcement, Apple disclosed that the installed base of iPhones alone is now above 1 billion.
Steves agrees that an electric car could be a long-term opportunity, but he cautioned that competing with Tesla is a higher-risk proposition, which is likely to require more than $10 billion in research and development costs. He sees a better opportunity in leveraging Apple Wallet, software on every iPhone that is used to manage Apple Pay, airline and event tickets, and other items.
Were Apple to enter the crypto-exchange business, Steves said, they would “immediately gain market share and disrupt the industry.” He noted that Square (SQ) generates about $1.6 billion a quarter from Bitcoin-related revenue on an installed base of about 30 million.
Apple, he said, has an installed base of more than 1.5 billion. If you assume 200 million users transact, he said, that would be 6.7 times the size of Square. On that basis, he concluded that the opportunity for Apple could be more than $40 billion a year, potentially boosting the top line by about 15%.
And Steves said the “best part” is that the required R&D cost “would be de minimis,” pointing out that Square’s entire R&D budget is under $1 billion. “Net Net: fundamentals at Apple remain secure with a cash flowing business related to iPhones, peripherals, computers and services,” he wrote. “However, the firm could unlock a multi-billion dollar opportunity with a few clicks while investing into next generation chips as well.”
He also says a move by Apple to buy $1 billion of Bitcoin would boost interest in Apple Exchange, or whatever the theoretical cryptocurrency-trading venue would be called. “Where would the price of bitcoin go if Apple purchase the asset?” he wrote. “Likely up.”
The note arrived the same day that Tesla announced it has purchased $1.5 billion in Bitcoin, and that it would start accepting the currency for payments. Bitcoin was up 12.8%, to $43,037 on the Tesla news. Imagine what would happen if Apple jumped into the fray.
Write to Eric J. Savitz at eric.savitz@barrons.com
February 09, 2021 at 03:03AM
https://www.barrons.com/articles/forget-about-cars-apple-should-launch-a-crypto-exchange-analyst-says-51612814633
Forget About Cars. Apple Should Launch a Crypto Exchange, Analyst Says. - Barron's
https://news.google.com/search?q=forget&hl=en-US&gl=US&ceid=US:en
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