A recent move by one of the world's largest online retailers points to an increasing war that could change the way you and I shop for just about everything.
And while I think the shift will be a good thing for consumers, the looming battles in this space could create vast amounts of wealth for investors who jump in early.
First, let me give you a little background...
At the end of September, eBay (Nasdaq: EBAY) bought Chicago-based payment processor Braintree for $800 million in cash and folded the company into its PayPal division. Braintree says it handles $12 billion in transactions a year, and works with clients like OpenTable (restaurant reservations), Uber (arranging a driver) and Rovio (creator of the inane but ubiquitous Angry Birds franchise, a popular gaming app). It also owns Venmo, which lets individuals text payments to one another.
The purchase is part of a string of recent deals: eBay also recently acquired a social shopping site, the recommendation site Hutch, and Red Laser, which scans bar codes. Taken together, it appears eBay is gearing up to go mobile and vie to be the king of e-commerce, a spot now held by Amazon.com.
This fits right in with one of my 11 "Game-Changing" investment predictions for 2014.
I think Michelle Peluso, formerly the global consumer chief marketing and Internet officer with Citigroup, was spot-on when she said, "I'm not sure any of us will carry (physical) wallets 10 years from now."
She and I think most payments will be made through "apps" or some type of cell phone-based technology... and everyone from Amazon to eBay to Apple are looking for ways to capitalize on this new trend.
But, as you may know, I look for the Next Big Thing. Apple, eBay and Amazon were game-changers before, but that time has passed for those companies. Instead, I like a company I am sure many of you have never heard of...
My pick in this space is a hardware manufacturer, NXP Semiconductor (Nasdaq: NXPI), which builds the special near-field communications chips that allow phones and mobile devices to transmit purchase information securely. It has had a great run this year, up about 38%, and I think it would have made the S&P 500 list were it not based abroad.
Since I first recommended NXP to my Game-Changing Stocks readers in July 2012, NXP is up nearly 70%...
So far, near-field chips have been a booming business for NXP, growing 19% in 2011, 41% in 2012, and it's on track to grow 30% this year (to $1.26 billion), according to analysts at Merrill Lynch. These ID chips were just 16% of NXP's $4 billion revenue base in 2011, but should account for 35% of sales by 2015.
If mobile payments keep growing at triple-digit rates, NXP could easily double its profits in a few short years. You can imagine what that would do to its share price. It clearly has the most upside of any company in the mobile payment space.
NXP is particularly appealing at the $34.50 to $36.00 range -- so it may be wise to wait for a pullback, which can hit an upcoming "game-changer" like NXP at any time. Either way, I think NXP is a strong buy.
I will also be looking into other alternatives. I think this sector is going to wind up looking a lot like my picks in the electronic health records space -- big winners that keep on winning. The "iCash" phenomenon is, after all, the inevitable future.
To learn more about the iCash revolution, and my 10 other "shocking" investment predictions I've made for 2014 and beyond, click here now.
- Andy Obermueller
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