Mastercard Inc, Apple Inc., eBay Inc: Which Mobile Payment Stock To Buy Now

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November 6, 2014 1:32pm NASDAQ:QQQ

investIan Wyatt: The mobile payments business has attracted lots of attention in recent weeks.  That has many growth investors wanting to know the best way to invest in mobile payment stocks.


mobile-payment-stocks

Two big events have encouraged investors to gain more exposure to this growth trend. First, eBay (Nasdaq: EBAY) announced that it would spin off its PayPal division in 2015. Second, Apple (Nasdaq: AAPL) announced a new mobile payments service called Apple Pay.

Those are just the latest mobile-payments headlines. There are two better reasons to be bullish on mobile payments.

First, the majority of retail transactions in the U.S. are conduced with a credit card or debit card. But worldwide, 85% of retail purchases are cash transactions. That creates a big opportunity, as the rest of the world adopts digital payments.

This is part of an unstoppable trend underway that I call “the end of cash.” In developed-country markets, consumers prefer electronic transactions. In developing markets, the transition to digital payments is in a much earlier stage.

Second, there has been explosive growth in mobile-phone usage. One hundred sixty-six million Americans have smartphones. That translates into 70% market penetration. Globally, the number is 1.76 billion smartphone users, or 25% penetration. A growing market of smartphone users means that more people are going to be able to conduct financial transactions through their phones in the coming years.

Digital payments and mobile usage are both great growth opportunities. They intersect in the mobile payments sector. A growing number of consumers want to make payments directly through their mobile phone. That would eliminate the need to carry cash, credit cards, or debit cards.

This unstoppable growth trend is already underway. As a Daily Profit reader, you  want to invest in the next big profit opportunity. You’re probably asking yourself one question: “What are the best mobile payment stocks to buy today?”

Your initial inclination might be eBay. Its shares have risen nearly 12% since its PayPal spinoff was announced.  Or perhaps you’re thinking that Apple is the best investment.  You may think Apple will innovate payments in the same way the company changed the smart phone.

When investing in the mobile payments sector, I think we can do better than those two companies. Apple is a great company, and I own and recommend the stock. The company’s foray into mobile payments is exciting. But it’s likely to remain a very small part of their overall business. Therefore, the financial impact of payments will be insignificant.

eBay is also an interesting company. I’ve followed the stock closely, and considered recommending it in the past. I love the PayPal business, and I’m excited for this spinoff. But right now it’s unclear how PayPal will perform as a stand-alone business. For that reason alone, I’m hesitant to pull the trigger and buy eBay stock.

There remains lots of uncertainty about who will win the mobile payments war. Will it be PayPal? Apple Pay? Square? Or will a new Silicon Valley startup win the war? I won’t even pretend to know the answer.

But I do know a safe way to invest in the end of cash, and the explosive growth of mobile payments. And I do know the best mobile payments stock to buy today.

It’s a company that I’m sure you know.  The company is MasterCard (NYSE: MA).

After Visa, MasterCard is the second largest credit and debit card company in the world. Every day, the company processes 51 million financial transactions.

MasterCard provides the network for processing credit card transactions. It partners with banks, and issues credit and debit cards to their customers. It also works with merchants, allowing them to accept payments using its cards.

Unlike banks that issue credit cards, MasterCard has no credit risk. Every year, the company simply collects a small fee on billions of transactions.

That’s a great business. It’s translated into operating profits of more than 50%. Those types of margins are huge. It’s MasterCard’s wide moat that allows it to operate such a profitable business.

Last week, MasterCard reported another great quarter. Earnings and revenues beat analyst expectations, with EPS surpassing the record total from the previous quarter. That sent MasterCard shares soaring 13% in a few days.

MasterCard has been a top-performing stock for years. I think it’s the safest and best mobile payments stock you could buy for your portfolio today.

I currently own shares in my account. I bought the stock back in late 2009 at $23.56 per share. The position has risen 280%, beating the S&P 500 by 190%.

If you’re looking to add exposure to mobile payments, look no further than MasterCard. A solid stock like this should continue delivering superior returns for long-term investors.

This article is brought to you courtesy of Ian Wyatt from Wyatt Investment Research.


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