Revenue from Apple Pay, Card and Cash, doubling and redoubling, will exceed $1 billion in 2020 says analyst Krish Sankar.
From a note to clients that landed on my desktop Monday:
The Apple Pay, Card, and Cash products (payments platform) collectively have shown robust 100%+ Y/Y growth in recent years and with the ongoing COVID-19 virus we believe usage and penetration of Apple’s digital payments offerings has only accelerated further. While Apple has portrayed these digital services as complementary to its mobile hardware platforms, we believe future scaling out of these services globally coupled with increasing depth and sophistication of them could position Apple as an emerging contender in the fintech space. We conservatively forecast overall Apple payments platform revenues will exceed $1B for the first time in CY20 and quickly exceed $2B by CY22. From an EPS perspective, contributions remain small at 2-3% of Services profits or $0.03-0.04. Our key takeaways are:
- Apple Pay is expected to remain the cornerstone of Apple’s payments platform strategy as the digital wallet continues to see increasing acceptance at US retailers (both physical and online). We forecast Apple Pay will remain the largest revenue driver at over $800M annually for the next couple years (~65% of payments platform) and growing at an 18% CAGR through FY23. We see scope for further expansion at European retailers as well as increased penetration in transit systems, especially in Asia.
- Launched in C2H19, Apple Card is the newest product within the payments business, and we forecast that it could become the largest revenue driver by FY23 growing at an 89% CAGR to $1.2B. This new revenue estimate assumes a conservative 2-3% penetration rate into digital-based global retail spending. We also assume Apple receives a 1% fee for transactions, a rate that we believe is in line with the average for card issuers and could be the most lucrative opportunity longer-term compared to the Pay and Cash products.
- Apple Cash provides a high demand feature to end users – peer-to-peer cash transfers, and is very complementary to the Apple Card given the cash back and cash management features. We model for Apple Cash revenues to grow but remain below $100M for the next several years as we assume only a mid-single digit % of consumer cash transfers are ‘instant transfers’ that could generate upwards of a 1.5% transaction fee.
Outperform rating and $133 price target unchanged.
Cue Figures 1 and 2: :
My take: Growing 100% year, truth be told, from a vanishingly small base.