On Monday, Apple (AAPL) announced its new credit card product, Apple Card, in partnership with Goldman Sachs (GS). This marks the next pressure on the consumer bank for Goldman. The bank's first consumer product, Marcus, has been a great success since its launch in 2016 with Reuters, which reported last week that the bank now has over $ 36 billion in consumer deposits and $ 5 billion in consumer loans. I think the Apple card will be a successful product for both Apple and Goldman, but in combination with Goldman's current valuation, provides a very attractive risk / reward that is skewed to the upside for Goldman shares.
The table above provides an overview of Goldman Sach's valuation relative to the industry. attractive valuation on a relative basis that gives the lowest PE ratio based on 2018 earnings and 3 years average earnings, as well as price-to-hand book
Of course, Goldman shares today have a degree of uncertainty that is over the shares linked to for the ongoing investigation of the 1MDB scandal, however, I believe that at 0.79x specific book, fines / penalties resulting from the scandal are more than embedded in Goldman shares. a cash fine of $ 17 billion will bring Goldman's price-to-hand book ratio to 1.00 – still relatively attractive to the industry's peers.
Apple Card Opportunity
Now let's talk about the potential of the Apple Card. The credit card industry is very well established, competitive, but perhaps most importantly massive. I think Goldman Sachs has a very good chance of penetrating the market and getting traction among consumers very quickly.
First of all, the Apple Card is competitive without paying fees, using analytics via the Apple Wallet app and improving security thanks to Apple and iOS. Second, and most importantly for Goldman, the vast number of potential customers is that the iOS platform provides direct access. CIRP recently reported that it is over 189m iPhones active in the United States and Apple CFO Lucas Maestri recently confirmed that there are over 900m active iPhones worldwide. Of course, not all iPhone users will qualify for a credit card, and not everyone is guaranteed to apply or be accepted for a credit card, but Goldman does not need them all – just a few.
The table below, provided by Value Penguin, provides the number of active credit card companies for the largest US issuers.