Apple Inc. (NASDAQ:AAPL) and Paypal Holdings Inc (NASDAQ:PYPL) are trending after the Wall Street Journal reported that Apple and banks are in talks over a potential mobile P2P payment service. Paypal’s Venmo app currently dominates the person to person payment space. Although financial payments revenue won’t mean very much to Apple’s top or bottom lines, an Apple P2P payment service would be another way for the company to keep customers in its ecosystem. The more people in Apple’s ecosystem, the more high margin iPhones Apple sells and the more programmers make apps for Apple first. With hundreds of billions of cash on its balance sheet and a forward PE of 10.7, Apple shares look cheap. Carl Icahn’s Icahn Capital LP owned 52.76 million of Apple shares at the end of June.
Although competition from Apple would hurt, Paypal will still be okay, as the majority of the firm’s transaction fees come from merchant payments not P2P payments. Paypal still has an opportunity to become the leading next generation bank in the same way that Amazon is the leading next generation retailer. Paypal shares trade at a reasonable 24 times forward earnings given the stock’s growth prospects.