On March 5th Appleinsider published what we consider to be one of the most important Apple (AAPL) pieces of the year. It reveals that Disney's (DIS) Magic Kingdom in Orlando, FL, has done away with turnstiles at the park's entrance as visitors are now greeted by workers holding iPod touches. This change is part of a larger initiative to create an entirely new payment platform within the resort. Tom Staggs, Chairman of Walt Disney Parks and Resorts announced that the company plans to provide customer wrist bands called 'MagicBands' that will act as a visitor's hotel key, pass card, and credit card. Along with the adoption of iPods, Disney is incorporating other elements of iOS that will enable Fastpass ride ticketing, maps, information on ride wait times, and the ability to view menus and book dining reservations. With the implementation of MagicBands, the era of the wallet is one step closer to extinction.
It's interesting that Disney CEO Bob Iger sits on Apple's board of directors and has decided to release a MagicBand just as rumors are heating up regarding the iWatch. Perhaps Disney is giving us a glimpse as to what is being discussed behind closed doors at Apple. Those who suppose that an iWatch would simply track time and mirror iPhone pre-existing functionality are ignoring the potential that we're seeing from Disney's initiative. Because an iWatch is attached to the body it is inherently more secure than a wallet or phone. As such, it is ideally suited to serve as a facilitator of secure financial transactions. If iWatch becomes the permanent version of Disney's MagicBand it will enable consumers to seamlessly checkout at grocery stores, gas stations, malls, and restaurants. It can serve as a car key, hotel key, house key and work credential. Which casino will be the first to revamp its payout platform to iWatch? Identity theft and credit card fraud will diminish. Financial management within families becomes easier to control. Important identification like drivers licenses and passports could be digitally stored. A wrist device has the opportunity to carve out its own niche in the mobile revolution.
Bob Iger isn't the only one who sees this shift coming. Everything you hear from Samsung (OTC:SSNLF) over the last two months is about enhanced security features and a new proprietary OS. Samsung is running scared. They know that their popular big screen smartphones are already being copied by competitors and they know the malware attacks on Android will be a defining issue when mobile wallet functionality takes off. The problem for Samsung is that enterprise will need to see 2-3 years of OS performance proof before it commits to using the company as a secure system to handle high risk transactions. Apple's iPad/iPod scanning infrastructure is already taking root and will explode when iWatch is released. Just in the last month we have seen Nordstrom (JWN), Home Depot (HD) and Disney switch to Apple hardware. As Google (GOOG) focuses its future on an enhanced version of GoPro Video with its $1500 Google Glass, Apple is capturing enterprise market share that positions it perfectly for the next wave of innovative disruption. iWatch fits the Jonathan Ive definition of "inevitable innovation". The potential of iWatch as a global necessity is more than compelling. As this expectation makes its way to Wall Street it is destined to become a stock moving variable for investors to be aware of. On Monday Bloomberg reported that iWatch is coming this year.
It's no secret that Apple stock action is in the midst of enduring a 5-month correction in response to a perfect storm of events that has included institutional re-balancing, fiscal cliff posturing, earnings misses, impossible year over year margin comparisons, and the associated negative sentiment that comes with a declining stock price. However, this is not the first multi-month Apply sell-off nor will it be the last. Wall Street has a tendency to overshoot and it appears to have done so once again. Goldman Sachs recently released a research note describing Apple as the most undervalued stock that the firm covers. 2013 still holds great promise for Tim Cook's company. Don't count out the world's most innovative company just yet.