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Summary

  • As the largest public company by market cap, Apple needs to enter seriously lucrative markets to show significant growth.
  • Mobile payments could take a bite out of credit card and digital payment businesses.
  • HealthKit could give Apple a foot in the door to the healthcare industry, a market that is quickly growing to 4 trillion dollars.
  • Apple's new "Metal" graphics processing technology plays nicely with the fast-growing gaming industry.
  • China remains a massive opportunity for Apple, as the company continues to expand into the world's most populated country.

Thanks in part to a recent surge in share price, Apple (NASDAQ:AAPL) once again sports a market cap that is over half a trillion dollars. Being the largest publicly traded company by market cap raises concern for some investors. With a PE ratio above 15, you could make an argument that the company is at least close to being fairly valued, which means that if Apple stock were to appreciate in value further, there would need to be some serious catalysts that are more or less unrelated to normal stock price fluctuations. Apple earned king-of-the-hill status on the back of the iconic iPhone. Creating another product that matches the success of the iPhone seems like a daunting challenge. People like to talk about innovation as the key driver of Apple's future. I think innovation is important, but if Apple is going to grow significantly, I believe they need to leverage the success of the iPhone to wedge their way into other massive businesses that already exist.

Mobile Payments

Apple's expected entry into mobile payments is nothing new. Tim Cook revealed in a recent conference call that there was a "big opportunity" for Apple in mobile payments. The latest iPhone features a fingerprint scanner that allows users to purchase items from the app store. Apple has also been rolling out iBeacons, which could facilitate indoor communication between merchants and consumers. In short order, Apple could take a giant step into the mobile payments industry, taking a bite out of PayPal's (NASDAQ:EBAY) revenue (just shy of 2 billion in the first quarter), or, for that matter, the revenue of credit card companies that routinely process transactions in stores across the world. If I knew I didn't have to carry around my fat, annoying wallet, and instead could just wave my phone around wherever I went, I would put that chubby hunk of leather in an old shoe box and save it to show to my grandkids who would hardly believe that we used to carry such annoying things around with us all the time. My point is, I would actually change my spending habits to go through mobile payments if there was a critical mass of stores that could accept these sorts of transactions. How much could this affect Apple's bottom line? - I don't know. But I do know that MasterCard (NYSE:MA), Visa (NYSE:V), and American Express (NYSE:AXP) are collectively valued at more than 300 billion dollars.

HealthKit

This one is tricky. HealthKit offers Apple consumers something totally sweet: the opportunity to have your health records available in a central location. Additionally, new devices are coming online that help track statistics about an individual's health. The healthcare industry commands huge profits (not dying is a pretty good sell). According to a recent article on Forbes.com, US healthcare spending is now just under 4 trillion dollars. It is far too soon to be able to project how much of this, if any, Apple could conceivably fetch for its fledgling health technology, but if Apple could find a way to grab just a sliver of this massive, growing number, they would be able to add billions in revenue to their bottom line. If Apple avoids monetizing HealthKit completely, at a bare minimum they will have yet another enticing reason to keep their users in the Apple ecosystem.

Gaming

At WWDC 2014, Apple revealed an astounding improvement to graphics processing performance through what they call "Metal." This improvement seems to be directly focused at making processor-heavy video games possible on mobile devices. Apple isn't in the business of making video games but they are in the business of empowering game-makers to bring their best-selling titles to Apple devices, allowing Apple to sell and take a cut from sales on the app store. According to an article on Gartner.com, the video game market is fast approaching 100 billion in revenue. In addition to padding app sales, Metal will likely help Apple's devices maintain their reputation for performance and retain a devoted community of gamers.

China

China offers investors a particularly promising opportunity. According to CNET, analysts believe a recent deal with China Mobile (NYSE:CHL), the largest cell phone carrier in China, could account for the purchase of as many as 30 million more iPhones in 2014. This is not including iPhone sales in China that don't come through China Mobile. With an increasingly affluent population that is four times the size of the US population, it is easy to see how China could seriously boost Apple's revenue.

Disclosure: The author is long AAPL, AXP. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.