Sterne, Agee & Leach
Apple at the WSJDLive conference noted a potential for a
"marriage" partnership between Apple Pay and AliPay.
AliPay is the mobile payment arm of Alibaba Group Holding
(ticker: BABA). It has about 550 million users in China and
dominates the China mobile payment market with a 70%-plus share. We
believe Apple ( AAPL) has about 800 million user accounts. The top
three mobile payment providers in China are AliPay, TenPay and
UnionPay, but the potential tie-up here creates a growing
opportunity.
AliPay dominates the China payment market. The proliferation of
mobile payments with smartphones will be positive for NXP
Semiconductors ( NXPI) with near field communication (NFC) and
Secure Element ensuring the security of transactions and creating a
domino effect. We reiterate our Buy rating on NXP and $82 price
target.
Apple's Chief Executive Tim Cook at the WSJDLive conference
talked about potential partnerships between Apple Pay and AliPay.
The proliferation of mobile payments will be positive for NXP as
more smartphones enter the mobile payment ecosystem.
As we have noted before, assuming 50% payment penetration in
smartphones by 2017 is $300 million-$700 million a year and 35
cents-70 cents of incremental revenue and earnings per share for
NXP. Our $82 price target, about 14.6 times our calendar 2015
estimated EPS, is still an about 30% discount to peers.
Our calendar 2015 revenue and EPS estimates are $6.3 billion and
$5.61, respectively, and our calendar 2016 revenue and EPS
estimates are $6.9 billion and $6.11, respectively. Continued
execution, and product cycles position NXP as a multiyear story at
attractive valuation. NXP has an analyst day Nov. 5. While the
mobile payment ramp requires many more payment-retailer
relationships, customer and handset original equipment
manufacturers (OEMs) adopting, we believe it is still early and
there is significant potential.
Mobile payments are driven by strong partnerships, as Apple Pay
had 22,000 retailers and was available at 220,000 storefronts at
launch and 500 banks signed up.
-- Vijay Rakesh
-- Troy Cowdrey
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