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Don Dion
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Don Dion (donalddion@gmail.com, @DRDInvestments) is the owner and Chief Investment Officer of DRD Investments, LLC, based in Naples, FL. and Williamstown, MA., a family office focused on managing a long/short hedge fund, real estate assets and various other financial assets for the Dion family.... More
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  • Vodafone Tries To Challenge Apple; Hype Over Mobile Payments Increases

    In addition to announcing the new Apple Watch and the iPhone 6 Plus, Apple (NASDAQ:AAPL) revealed its new mobile payment platform, Apple Pay.

    The company hopes to succeed where Google (GOOG.GOOGL) did not and replace physical wallets with the iPhone.

    While many Apple watchers have anticipated the development of the mobile payment system, the unveiling of the iPhone 6 and the Apple Watch garnered slightly more buzz than did Apple Pay.

    How It Works

    Apple Pay uses the credit card from the payee's iTunes account or another credit card that the user adds through the iSight camera. This will let the consumer to purchase items with Touch ID. Apple Pay will create a unique, one-time number for each authorized transaction, thus creating a digital code that will be more secure than the code on the back of a charge card. This prevents cashiers from seeing the name, security code or card number of the consumer.

    Currently, Apple Pay will work for the three largest payment networks-Master Card, (NYSE:MA) Visa (NYSE:V) and American Express (NYSE:AXP), as well as Capital One and Navy Federal. Apple estimates that over 210,000 merchants will accept these types of payments.

    Edge Over Other Technologies

    The technology that Apple Pay uses is similar to PayPal's "One Touch PayPal" system, which lets consumers purchase items with a single touch of the PayPal app at participating merchants.

    However, Apple Pay will utilize near-field communication (NYSEMKT:NFC), an innovation that enables consumers to pay by tapping or waving their phone near the payment terminal. According to one recent study, this technology stands to handle as much as $59 billion in payment transactions by 2017. This represents nearly exponential growth from the $1 billion in mobile proximity transactions in 2013.

    If Apple Pay succeeds in garnering a large segment of the mobile pay market, this could represent a significant source of revenue for the company.

    Increased Competition A Good Sign in the US and Abroad

    In addition, Apple Pay will face competition in the UK when Vodafone (NASDAQ:VOD) will launch its own mobile wallet platform. The British mobile company has developed its own technology to integrate with Visa that will use a SIM card embedded with NFC technology. Vodafone is collaborating with third-party card companies, and will it will offer the technology to banks for use with their own payment systems.

    Greatest Risk: Consumer Sentiment

    The most significant hurdle to achieving market domination may not be the competition. Instead, consumer sentiment and concerns over data breaches may play a larger role in delaying widespread usage of mobile proximity payment platforms.

    In a recent survey taken by CreditCards.com, 62 percent of all respondents "hardly ever" or "never" use a smartphone for payment.

    AAPL Shares Jump On News of Tech Advances

    Immediately after Apple released the details of Apple Pay, shares in the company increased by 4.5 percent in contrast to eBay shares, which dropped 2 percent.

    (click to enlarge)

    (Nasdaq.com)

    Strong Earnings Underpin Tech Developments

    Earnings per share in Apple stock for the third quarter were $1.28, an increase of 19.6 percent over the same quarter last year. The stock was at $79.02 on the first day of trading in January 2014, and currently it trades near $98.

    Signs of increased major competitors also suggest growing demand and excitement around the technology, which could certainly prove to be a boon for Apple as a current market leader.

    Conclusion: Apple Beats Competitors To Market; Looks Continually Strong in 2014

    Apple Pay has beaten the Vodafone mobile wallet to market and will have a head start in the UK. Operating in over 30 countries, Vodafone has an enormous presence in developing regions, particularly Africa, the Middle East, and Asia-Pacific.

    (click to enlarge)

    (Source)

    With mobile payment systems in increasingly rapid demand (McKinsey, 2012) in many of the networks that Vodafone serves--Apple's head start is even more meaningful.

    The timing of its release comes as concerns about digital security have increased after yet another retailer, Home Depot (NYSE:HD), reported a data breach and soon after a hack on iCloud that circulated nude photos of Kate Upton and Jennifer Lawrence.

    Moreover, Venmo Touch and eBay's "One Touch PayPal" have been recently launched, although the initial reviews on the products suggest that Apple Pay will not face serious competition from them.

    Apple may be uniquely situated to overcome concerns over mobile payment security and gain additional market share given its near-field communication system.

    We are increasingly positive on AAPL, relative to its competitors, moving ahead in 2014.

    We invite readers wishing to join the discussion on Apple to click the +FOLLOW button above the title of this article, and those looking for the latest updates to click +Get real-time alerts.

    Disclosure: The author is long AAPL. 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.

    Tags: AXP, V, VOD, AAPL, long-ideas
    Sep 17 4:08 PM | Link | Comment!
  • Amber Road Lockup Expiration: Today, September 17
    • The lockup period on AMBR will come to an end on September 17; at this point, AMBR's pre-IPO shareholders, executives, and directors will be able to sell their shares.
    • AMBR's price could decline by 5.5% around the time of the event, according to recent research, particularly given holdings by powerful VC firms, encompassing Goldman Sachs.
    • AMBR has shown revenue growth in recent years, but its losses have also ballooned; it isn't clear AMBR has the chops to compete with its heavyweight competitors.
    • We see a significant short opportunity ahead for investors, keen for an aggressive play, on AMBR.
    • Further details here.

    Disclosure: The author is short AMBR.

    Tags: AMBR
    Sep 17 9:42 AM | Link | Comment!
  • ATEN Lockup Expiration: September 17
    • September 17 marks the end of the 180 day lockup period on ATEN that began with the application networking technologies firm's March 20 IPO.
    • At this point, the firm's pre-IPO shareholders, directors and executives could likely begin selling their 46.5 million shares in the company-- nearly four times ATEN's IPO shares.
    • ATEN had a disappointing performance post-IPO; we suspect that shareholders will be eager to sell off their shares of the ailing stock with the conclusion of the lockup period.
    • With negative abnormal returns in 2014 shown to be (-5.5%) in the days surrounding a firm's IPO lockup expiration, we see ATEN's upcoming event as a short opportunity.
    • Further details here.

    Disclosure: The author is short ATEN.

    Tags: ATEN
    Sep 17 9:40 AM | Link | Comment!
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