Cramer says Goldman Sachs’ Apple Card will lift both stocks (video)

Goldman’s Apple analyst, on the other hand, thinks Apple is headed for $140 a share.

From Jim Cramer’s Mad Money show Thursday:

According to Dan Schulman, the CEO of PayPal,… payments represent a $100 trillion global addressable market opportunity.

Apple just got in the race with no financial risk. That’s all borne by Goldman. As for Goldman, they’re not cannibalizing anything because they don’t really have another card.

Apple sells at less than 15 times next year’s earnings. Goldman sells at just 7 times earnings next year’s earnings. How embarrassing!

I think they’re both undervalued here, in part because the financial analysts who follow Goldman and the tech analysts who follow Apple simply don’t understand these news stories.

Cue the video:

My take: Speaking of analysts who follow Goldman and Apple, Goldman’s Apple analyst, Rod Hall, looked at Apple’s Services offerings, including Apple Card, and stuck to his Neutral rating and $140 price target, the lowest of the 30 Apple analysts whose targets I track.

From Hall’s March 25 note to clients:

Apple Card interesting but small earnings impact for Apple. Apple announced a new credit card (“Apple Card”) which offers 3%/2%/1% cash back on purchases made directly-with-Apple/with-Apple-Pay/other-purchases. Even though Apple Pay is becoming more available we would still expect a large percentage of transactions to be done at the 1% return level (using the physical card) so we would expect the typical consumer to perceive the cash return rate to be OK but not great (vs. 1.5% on all transactions available on some competitor cards). Assuming a 35bp/dollar spent take rate (inline with a 20bps-50bps range based on industry checks), $1,000/user/month spend (roughly inline with Amex cards) and 21m users (~10% of iPhone installed base in the US), we estimate Apple Card could generate $882m in revenue and $0.12 in EPS (we show sensitivities in Exhibit 1 below). This would equate to just under a 1% uplift to CY20 FactSet consensus EPS.

3 Comments

  1. Fred Stein said:
    Rod Hall said Apple Card can give Apple nearly 1% increment to EPS for virtually no investment or risk to Apple. That’s great considering AAPL is priced as if there’s near zero growth.

    The physical Apple Card is a free billboard.

    The complete deal with Goldman make Apple more sticky and will push more merchants to support Apple Pay in all it forms.

    Apple can expand into other financial services.

    0
    March 29, 2019
  2. Fred Stein said:
    Off Topic – relates to the Magazine announcement and explains why Apple got 300 magazines.

    “Print is now an ancillary medium for almost every audience. The primacy of magazines has been (mostly) supplanted by digital, broadcast and social media, especially among millennials. While many magazines can still thrive in print or digital, most will be smaller parts of the media-mix for readers and advertisers.
    Magazines continue to lose advertising. McKinsey estimates that the global advertising share of consumer magazines will have fallen from 6.7% to 2.7% during 2009-19. In an overall advertising market that is forecast to grow by an average of 5% annually, magazine print advertising is predicted to decline by 6% over the next four years. In the UK, magazine advertising fell by 9% in 2015 and is forecast to decline a further 4% this year. And there may be worse to come: influential US venture capitalist Mary Meeker asserts that print media as a whole still gets up to four times the revenue justified by its audience – and, therefore, has much further to fall.”

    From https://whatsnewinpublishing.com/2016/09/how-magazine-companies-must-change/

    0
    March 29, 2019

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