The “Mobile Wave” is everywhere.
And I do mean everywhere …
In fact, it’s becoming so ubiquitous … so mainstream … that it’s easy to miss the magic of this paradigm-changing technology.
And if you miss the magic … you’ll also miss the profits.
Let me demonstrate what I mean – and show you a way to play this staggeringly powerful trend.
And I’m going to start by telling you about my barber.
That’s right … my barber.
Dial “M” For Money
I couldn’t help but think about the paradigm-changing Mobile Wave when I visited my barber’s shop the other day. She actually cuts my hair the old-fashioned way – with electric clippers and a long, silver pair of scissors.
But it was how I paid for that haircut that spotlights the huge profit potential that the Mobile Wave offers all of us. You see, as soon as she was finished cutting, and had whipped aside the protective sheet, my barber snapped a special credit-card “reader” onto her smartphone and swiped my credit card. I added in my typically generous tip and then used my fingertip to “sign” the phone’s screen – completing a simple “Mobile Commerce” transaction.
It’s impossible to overstate how quickly people are adopting this technology for buying and selling services.
When I travel on business, I pay for my cab rides on a smart phone.
When I recently took my wife to see the new Star Trek feature film, she simply waved her iPhone at an electronic scanner that confirmed our purchase and allowed us into the movie.
While en route to Florida a few days ago, my teenage daughters stopped at an airport restaurant where they ordered and paid for their meals by using the eatery’s iPad.
Like I said … the Mobile Wave is everywhere.
And it’s about to explode into an “unstoppable trend” – Rule No. 2 of my five-part strategy for creating high-tech wealth.
You see, smartphones and tablet computers represent the biggest change in tech platforms since the PC revolution began in the mid-1980s. Mobile devices now enjoy a 5-to-1 sales advantage over PCs.
But the Mobile Wave isn’t just about hardware. Indeed, consumers are going way beyond calling, texting, taking pictures and surfing the Web.
They’re using handhelds to buy everything in sight – from consumer electronics to flowers to jewelry to event tickets. They’re even banking and trading stocks with these devices.
As a result, mobile commerce ranks as the brightest spot in the nation’s entire retail ecosystem – by a country mile.
A new report reveals that consumers only increased their spending at physical retail stores by a mere 1% in this year’s first quarter as compared to the same period last year. Even with modest inflation, that’s barely breaking even.
However, the report from market research firm comScore Inc. found that so-called e-commerce – shopping conducted from desktop or laptop computers – grew 13% last year.
Not too shabby. Until you compare it with the shopping sprees consumers are going on with their tablets and smartphones.
Mobile commerce surged a stunning 31% in the first quarter to a value of $5.9 billion. Yes, that’s still only 11% of the $78 billion in total electronic transactions that quarter, the comScore report said.
But “m-commerce” – as it’s now referred to – is growing 31 times faster than brick-and-mortar retail.
That “m” stands for mobile. But it also stands for money – and for maximum change.
M-commerce is why so many “big-box” retailers are struggling so badly right now. Folks would rather buy something from Amazon.com (have you become an “Amazon Prime” customer yet?) than take the time to drive to the local J.C. Penney.
That’s why J.C. Penney’s stock has plunged by half in the last 12 months, and why the management of that retailer and others are scrambling to adjust.
That’s how transformational mobile commerce has become.
And there’s one firm that is blazing a path to improve the depth and quality of mobile commerce transactions.
I’m referring to NXP Semiconductor NV (NasdaqGS: NXPI), a Netherlands-based company that’s become the clear leader in making mobile-computing chips that facilitate a technology standard known as Near Field Communications (NFC).
NFC is a close-range, wireless data exchange that has a lot of potential for m-commerce because it allows consumers to bypass cash registers or human ticket takers. In fact, all you really have to do is hold your phone up to the special wireless reading device and the transaction in finished in the blink of an eye.
NXP makes the chips that allow you to turn your smart phone or tablet into a digital wallet. It actually helped invent this technology and holds several key patents that serve as great barriers to entry.
NXP was created in 2006 as a spinoff from the European conglomerate Phillips Electronics. NXP went public nearly three years ago and shares are up roughly 175% since then.
As dramatic as that sounds, don’t worry – there’s plenty more where that came from.
You see, the whole wireless-payment wave is just getting started. And several industry giants have lined up as supporters of NXP’s technology.
First and foremost, there’s Google Inc. – the proverbial 800-pound gorilla in a plethora of Web-based technologies. Google makes the Android operating system that now dominates the smartphone market, and is a key backer of mobile commerce. And it’s thrown its massive marketing clout specifically behind NFC.
In particular, Google has deployed its digital commerce service known as Wallet at thousands of retail locations throughout the U.S. It’s also collaborating with NXP for the next generation of this technology.
Samsung Electronics Co. Ltd. is getting into the near-field act as well. Relying on Google’s Android system, Samsung has become the leading seller of smart phones in the U.S.
Earlier this year, the Korean giant began embedding payment software in its new smartphones. Called payWave, Samsung’s payment engine comes from financial leader Visa Inc.
Visa’s arch rival MasterCard Inc. also is backing NFC technology with its MasterPass program for digital wallets.
Market analysts say getting Google, MasterCard, Samsung, and Visa behind near-field communications could be a boon to this new industry.
So far, it’s driving NXP’s growth. Its near-field chips are part of a business segment the firm calls Identification.
Last year, that unit accounted for roughly $986 million in sales, nearly one-fourth of the company’s overall revenue. That’s a dramatic statistic, to be sure. But here’s something that will get you even more excited: That $986 million represented a 41% increase from the year before.
And that makes it NXP’s fastest-growing segment.
NXP says it is driving the global rollout of near-field communications. To do so, it is adding inventory control for retailers as well as letting motorists pay for parking meters with their smartphones.
But this company is hardly a one-trick pony, meaning there are other profit catalysts at work.
Though mobile phones are a key product segment, NXP is nicely diversified. It makes chips for autos, cellphone towers, consumer electronics, industrial technologies and security.
With a market cap of $7.6 billion, the stock sells for roughly $30 a share.
And that’s cheap – dirt cheap, in fact – when evaluated by several of the usual measures.
Take the stock’s valuation, for starters.
NXP shares trade at just 8.65 times forward earnings – or roughly half the forward P/E of 16 that Thomson Reuters estimates for the Standard & Poor’s MidCap Index.
Over the past three years, earnings per share (EPS) have grown by an average of 28%. If profits continue to grow at that pace, the company’s bottom line would double in about 2.5 years.
– and the stock would have a good chance of doing the same.
NXP is cheap when measured by its so-called “PEG ratio,” too. The PEG ratio – technically the P/E ratio as a percentage of the projected rate of earnings growth – is 0.39.
With the PEG ratio, a lower number is indicative of a cheaper stock – and anything less than 1.0 is potentially a bargain.
As with any methods of analysis, everything has to be viewed in context. But the low PEG ratio – coupled with the P/E that’s low (and also low relative to its peers) and a history of hot profit growth – points to a stock that has a hefty upside.
In fact, NXP also meets Rule No. 5 of my strategic system, which tells us to focus primarily on stocks that have the potential to double in price in a relatively short span of time. These bargain-level valuations – coupled with the fact that NXP could double its profits in 2.5 years – underscores that this is a stock that could easily fulfill that objective.
NXP is absolutely the kind of high-quality, high-growth firm I have in mind when I tell you and my other readers that “the road to wealth is paved by tech.” Stocks like this one are the type that can help transform the average U.S. net worth of $25,000 into a more-meaningful $250,000 n just a few short years.
And specific numbers aside, transforming your outlook is what I want to do here at Strategic Tech Investor. In fact, that’s the goal that dominates my thoughts these days … as I troll the news for the latest developments, take a short sail on the Bay – or even get my haircut.
Transformational times are fueled by transformational trends like NFC technology and the overall Mobile Wave. Folks who ignore the changes and invest in “old reliable” stocks like J.C. Penny don’t just get burned … they get left behind financially – which is even worse.
We aren’t going to let that happen to you. We’re going to keep you aware of all the latest trends … keep you ahead of the masses – and help you build that hefty nest egg … and achieve the dreams that dominate your thoughts.
See you Friday.
Editor’s Note: Your feedback is very important. As always, I welcome your comments, questions and suggestions. Post a comment below … I look forward to hearing from you.