Alibaba (BABA), which recently set a record for initial public offerings, is interested in partnering with Apple (AAPL) in financial payments now that the iPhone maker has launched Apple Pay. That could one day be a boon for Apple stock.
A partnership between Alibaba and Apple isn’t just a flashy headline to give BABA and Apple stock a quick pop. It could drive real value over the long haul. And it would certainly make PayPal sweat even harder.
After all, Alibaba is already a giant in payments with 300 million active users. PayPal, for its part, is a monster itself, doing business in more than 200 markets around the world, but its active user base is only a little more than half that of BABA’s.
It’s this sort of threat that’s driving the spin off of PayPal from eBay (EBAY). The payments company needs undivided attention and resources to compete with all comers in payments, including Apple Pay.
And as for Apple Pay and Apple stock, it’s still far too early to predict whether Apple Pay will be a success. It launched earlier this month to positive reactions. But one thing that could certainly supercharge growth and ensure the success of any Apple financial payments business would be some kind of partnership with Alibaba.
Heck, as BABA chief Jack Ma likes to point out, Alibaba’s Alipay is the third-largest payment service in the world after Visa (V) and MasterCard (MA). It transacted almost $300 billion in gross merchandise value over the last 12 months on its Chinese retail marketplaces, according to The Wall Street Journal. Any company would love to get a piece of that.
Apple Stock Needs No Help, But …
As for Alibaba, it’s creating relationships with U.S. companies like Apple and Lions Gate Entertainment (LGF) to expand Chinese consumption of American exports, from small business products to mass entertainment.
But even if Apple and Alibaba do strike some kind of partnership, it won’t happen overnight. It will take even longer for any benefits to show up in top- and bottom-line numbers. This is strategic, not tactical, thinking.
Fortunately, neither BABA stock nor Apple stock puts any pressure on the companies to strike a deal. They’re both winners these days.
Apple stock is up more than 30% for the year-to-date even as the broader market has gained just 6%. Alibaba stock had the bad fortune of going public right before the market went into its October swoon, but has still acquitted itself well. BABA stock is up 4% since its September debut. More impressively, Alibaba stock is up 15% in the last two weeks.
Any partnership between two of the biggest names in tech is bound to get a lot of breathless attention, but beyond the hype, an Apple-Alibaba payments arrangement really could be a big deal.
If nothing else, it sure doesn’t hurt the bull case on either Alibaba or Apple stock.
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As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.