The Biggest News from Apple

09/15/2014 12:01 am EST


Jim Jubak

Founder and Editor,

Long time Apple watcher Jim Jubak discusses what he thinks is the most important revenue enhancing news from last week's new product announcement.

The most revolutionary product announcement development out of Apple's (AAPL) September 9 big product announcement meeting isn't the iWatch, isn't the iPhone 6 or the iPhone fatter 6, it's actually Apple Pay, not because I think this is the most revolutionary technology out there or because it's a product that's going to take the market by storm, but for what it means for Apple stock, because we still don't know the details of the deal but it now looks likely that the deal that Apple has negotiated with Visa and MasterCard and American Express would involve some payment to apple for all these tractions on the network, and that's really revolutionary for Apple, because Apple right now has such a low valuation because people say basically, “Hey, to keep the growth going this is a company that has to constantly innovate, has to constantly come up with new products, new killer products, has kind of a fashion element to it so that products either fail or don't fail, and you can't figure out which ahead of time,” so that's one reason that valuations are relatively low.

But if you can go from a situation where it's hard to predict what Apple's earnings growth is going to be to one where part of that earning stream is a, sort of a commission if you will, a steady stream of predictable earnings that come from all these transactions, even if it's relatively low to start with, that changes the game for Apple. It means that as you look at earnings there's a different quality to some of these earnings because they are a steady stream of transaction commissions, whatever, and that I think changes the valuation parameters for the company and for the stock, and moves it up, so we don't know yet whether how many transactions are going to go through Apple pay, crucial element, we don't know what the fee is going to be, a crucial element, but I'd certainly watch this part of Apple's business very, very carefully because it, rather than the next iPhone or the iPad Refresh that's coming in 2015 or the iWatch, this is the one think that I has the most capacity to change the Apple valuation.

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