Credit: Shutterstock photoBy John Divine, InvestorPlace Assistant Editor
If you’re looking for stocks to buy, the mobile payment space isn’t a bad place to start.
In fact, it’s sort of hard to ignore. Mobile commerce is one of the fastest-growing and most visible ways consumers are changing the way they interact with technology, and everyone who’s anyone wants to get in on the action.
One highly respected market research outfit, Forrester Research, expects the U.S. mobile payments market to nearly triple by 2019, ballooning from $50 billion to $142 billion. It’s tough to find a more attractive combination of growth and girth in any other industry.
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So, what are the stocks to buy to get a slice of the pie? Let’s take a look at today’s biggest players.
VeriFone Systems Inc (PAY)
Market Capitalization: $4 billion
1-year stock price performance: +20%
VeriFone Systems (PAY) isn’t the most traditional way to play the burgeoning mobile payments ecosystem, but it’s a fine way to play it nonetheless. Rather than focusing on the buy side of the transaction, VeriFone specializes in making terminals and point-of-sale systems that allow sellers to support mobile transactions.
The business model seems to be working for PAY stock, which jumped on Wednesday after topping first-quarter earnings estimates. Expected to deliver earnings per share of 41 cents, VeriFone instead posted EPS of 44 cents last quarter.
PAY isn’t just going after traditional markets like taxis, it’s also making major moves into higher-dollar markets such as petroleum. As the smallest company on today’s list, there’s still plenty of upside in PAY stock.
Market Capitalization: $375 billion
1-year stock price performance: -7%
It doesn’t get much more mobile than Google Inc. With its Android platform commanding more than 76% of the market in mobile phones, GOOG is positioned perfectly to parlay its power into mobile commerce.
It’s trying, of course. According to recent data from ITG, Google Wallet controls 4% of the mobile payments market. Why the disconnect between Android’s dominance and Google Wallet’s relative obscurity?
Once upon a time, Verizon Communications Inc. (VZ), AT&T Inc. (T) and T-Mobile US Inc (TMUS) all stonewalled Google Wallet, refusing to allow the service on any phones those carriers sold.
Now, after Google threw up its hands and flat-out bought Softcard — the mobile payments platform jointly owned by VZ, T, and TMUS — the three carriers have agreed to pre-install Google Wallet on their Android devices.
I expect Google Wallet’s 4% market share to get a little larger, to say the least.
Apple Inc. (AAPL)
Market Capitalization: $717 billion
1-year stock price performance: +62.8%
The mobile payment system you’ve probably heard the most about, of course, is a little service from Apple Inc (AAPL), Apple Pay. AAPL has been one of the best stocks to buy for the past decade, so it’s no surprise Apple is making a cameo on today’s list.
Apple Pay accounted for just 1.7% of the mobile payments market through the end of November. While that’s not a huge slice, remember that Apple Pay was just over a month old at that time; the service is only available on the iPhone 6 and the iPhone 6 Plus, both of which debuted in October.
Fast forward a few months and AAPL is virtually ready to crown itself king of mobile payments. The company recently claimed that two out of every three dollars spent through contactless payment systems were on Apple Pay. Not too shabby.
To clarify, contactless payment systems are the point-of-sale systems at checkout counters in physical stores. The mobile payment market is far larger than just POS, so Apple’s overall market share is far smaller, mostly due to the next stock on this buy list.
eBay Inc (EBAY)
Market Capitalization: $72 billion
1-year stock price performance: +4%
Through November, eBay Inc (EBAY),was far and away the leader in mobile payments, with a whopping 78% of the market. But with Google Wallet, Apple Pay and others gunning after it, I wouldn’t count on that number staying in the 70s for very long.
EBay’s payment mojo comes from PayPal, its wildly successful venture that spawned as a service for users of its popular online auction site. PayPal has been so successful, in fact, that it will be spun off as its own publicly traded company later this year.
PayPal’s mobile payment volume rose a remarkable 68% to $46 billion in 2014. Although its market share will likely fall due to competition, the mobile payments market is rising rapidly enough to lift all boats. And with its 2013 acquisition of Venmo, which focuses more on the social element of transactions, eBay is keeping its eye to the future.
That’s never a bad thing in the stock market.
Samsung Electronics (SSNLF)
Market Capitalization: $176 billion
1-year stock price performance: -6%
Rounding out the biggest players in this market is Samsung Electronics (OTCMKTS:SSNLF), even though it hasn’t yet made its grand entrance into mobile payments. Samsung, which is combatively taking on AAPL in virtually all areas of consumer tech (give us a Samsung electric car!), will once again spar with the Cupertino giant when it drops its much-awaited Galaxy S6.
Expected by some analysts to ship 46 million units this year, the S6 will usher in the era of Samsung Pay. InvestorPlace contributor Brad Moon explains how Samsung Pay is differentiated and how it could be a game-changer in the area:
“In a nutshell, Samsung hopes to overcome Apple Pay’s big lead by incorporating magnetic strip technology in the Galaxy S6 and Galaxy S6 Edge. This will let Samsung users have secure mobile payment (using the fingerprint sensor for security) while retailers can use their existing magnetic strip terminals — no equipment upgrade is required on the POS side.”
If the Samsung Galaxy S6 flies off shelves like it’s expected to, Samsung Pay could emerge as a formidable competitor.
As of this writing John Divine owns shares of GOOG stock, GOOGL stock, and AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
