Apple shares could jump higher if the tech giant enters the cryptocurrency market, RBC Capital Markets reported on Monday.
In a statement to customers, analyst Mitch Steves raised the iPhone price target to $171 from $154, implying a 25% increase from Apple's close on Friday. Target is the highest among Wall Street analysts. Steves also maintained an "excellent" rating on the shares.
While headlines about Apple's future offerings have recently focused on electric cars, RBC sees a shorter-term opportunity in the company's Wallet app. Over the years, Apple expanded the app and in 2019, with the help of Apple Card moved to financial services.
According to RBC, the wallet is already contributing to Apple's growing service business, but expanding operations in the cryptography sector could make it even more profitable for the company. Opening the Wallet app to buy and sell cryptocurrency could strengthen Apple's leading position in the industry and increase revenue from service delivery, according to the team.
"If the firm decides to enter the cryptocurrency business, we believe that it can immediately win market share and disrupt the industry," RBC said, adding that it could help the U.S. become a leader in cryptography within the next 10-20 years.
On Monday, Apple was trading about 0.6% lower as of 14:45 ET. Shares opened sharply lower, and then briefly turned into a positive value, and at the end of the day - in profit at face value.
Entering the cryptocurrency market is a profitable business. Square receives $1.6 billion in quarter revenue from bitcoin trading by approximately 30 million active users. According to RBC, Apple has an installation base of about 1.5 billion people, which indicates that it can amount to $40 billion a year from a crypto exchange based on a wallet.
Development costs will be minimal, the team added, with Square's entire budget of less than $1 billion.
Apple could exceed its costs for developing the crypto industry by buying $1 billion worth of bitcoin, analysts said, adding that it could attract more users to its wallet-based exchange and likely raise the price of bitcoin.
Such a purchase is not unheard of. Tesla announced On Monday that it had bought bitcoin for $1.5 billion, saying the token offers "more flexibility to further diversify and maximize profits from our cash." The popular cryptocurrency jumped above $44,000 for the first time on Monday on news of Tesla's purchase.