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USA Tech: Cashless Consumption
03/23/2015 7:00 am EST
One way to play the trend toward "cashless consumption" is with the developing move to mobile payments, explains Chris Versace, editor of Growth & Dividend Report.
Through the end of February, Chase Bank activated 1 million Apple Pay accounts. At Bank of America, 800,000 of its customers have started using Apple Pay. In total, more than 100 banks, credit unions, and other institutions are now supporting Apple Pay.
Retailers and other points of sale need to be able to transact with these mobile payment services in order for a consumer to complete his or her purchase.
This leads me to my sleeper recommendation on Apple Pay. It's a far more speculative recommendation than I generally make. But when I look at this sea change, it's a risk worth taking.
USA Technologies (USAT) has been working in cashless transactions for years. If you've paid using a credit or debit card at a vending machine, odds are high that transaction occurred because of products offered by USA Technologies.
During the last decade, USA Technologies has been developing its mobile payment capabilities and, recently, the company entered into a partnership with Apple that will expand the availability of Apple Pay to "self-service retail locations."
The initial rollout will be to around 200,000 self-serve payment terminals that its customers use for everything from coffee brewers to vending machines, kiosks, laundry equipment, and pay parking terminals.
This puts USA Technologies on the path to its goal of doubling its revenue to $100 million during the next three to four years. From my perch, that growth will drive a big move in earnings, cash flow, and book value.
Moreover, as the number of companies offering Apple Pay grows, so too will USA Technologies' customer base.
Prior to the deal with Apple, that base was roughly 8,500 in size and growing both in terms of customer count and the number of transaction connections across the customer base.
The fact that USA's solutions work with credit and debit cards, as well as contactless, mobile payments, makes it an easy solution for its customers to adopt.
I see upside to at least $4 a share during the coming 12-18 months as the Apple Pay and other mobile payment relationships take hold. This company could also be taken over by other players as they look to shore up their mobile payment processing position.
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