When Apple Inc. (AAPL) wants something, it usually gets it. 
Apple wants to dominate the app space in China, and on Monday it announced a deal with leading merchant China UnionPay. The deal will allow Chinese Internet users the ability to use UnionPay cards to make purchases at Apple’s App Store — and could be a boon for Apple stock. In the statement, Apple said customer will be able to link their Apple ID with their UnionPay debit and/or credit cards for “one-tap purchases.” China’s enormous number of Internet users (more than 661.5 million at last count) has made that country Apple’s second-largest market for app downloads. There’s no doubt the deal with UnionPay will make buying apps a lot easier for Chinese Internet customers. This deal is a good for Apple’s top and bottom lines, and for Apple stock.
The move by Apple to enter into a deal with state-run UnionPay is a coup for the personal technology giant, especially considering the Chinese government is usually extremely protective when it comes to letting “outsiders” in to do business with key state-run monopolies. The government already blocked rival payment card companies, such as MasterCard Inc (MA) and Visa Inc (V), from doing business in China, and that’s despite a World Trade Organization (WTO) directive that Beijing open up the bank card market by August 2015. While Chinese policymakers have snubbed the WTO (at least so far), they certainly haven’t snubbed Apple. This just goes to show that if you can bring enough cash and clout into China, you can make a deal with the powers that be. Interestingly, the Apple and UnionPay deal could have implications for a home-grown Chinese company that also wants to partner up with Apple — e-commerce behemoth Alibaba Group Holding Ltd (BABA). Alibaba has its own payment service called Alipay, and the existence of that service is something that UnionPay isn’t too happy about. As is the case with state-run monopolies, they don’t much care for competition, and Alipay is just that to UnionPay. I suspect the Apple deal with UnionPay also muddies the water for a potential deal between Apple and Alibaba. Last month, Apple CEO Tim Cook and Alibaba CEO Jack Ma attended the WSJD global tech conference. Both Cook and Ma praised each other at the event, and they talked about the potential to do a deal together, which presumably would involve the new Apple Pay payment service. While Ma expressed hope the two companies would work together, Cook was a bit more amorous:
“We’re going to talk about getting married later this week. … We love to partner with people who are wicked smart, that have flexible teams, that are product based and that push us.”
Wicked smart aside, the deal between Apple and UnionPay is more important for Apple stock than a marriage between Cook and Ma. And, I don’t think Apple would jeopardize its bigger deal with UnionPay in favor of what would likely be a much smaller deal with Alibaba. Still, depending on how cozy both Apple and Alibaba are with Beijing policymakers, there could very well be all kinds of partnerships involving the two mega-players in the future. Whatever happens with future deals, this week’s Apple and UnionPay announcement represents a bullish tailwind for Apple stock going forward — not that AAPL really needs too many more tailwinds to set shares sailing. Apple stock is up 16.7% in just the past month, while year to date AAPL has surged 42.2%. So, if you were waiting around for another reason to get long AAPL, then the UnionPay deal is it. As of this writing, Jim Woods was long AAPL.
