This Apple Stock Catalyst Is Hiding in Plain Sight

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While products like the iPhone 6 and iWatch will make a big splash in the fall when Apple Inc. (Nasdaq: AAPL) unveils them to the world, they're not the only reasons to think about buying Apple stock right now.

One major initiative in particular could have a huge long-term impact on AAPL stock, but the media have largely ignored it because it's not particularly sexy.

Ever heard of iBeacon?

If you haven't, it's time you learned about this game-changing technology that will transform not just how people shop but how they interact with all sorts of businesses.

apple stockBefore we get to how this could make Apple money and affect Apple stock, a brief explanation of this technology is in order.

What Is iBeacon?

The actual beacons are small Bluetooth Low Energy (BLE) transmitters mounted throughout a given location, such as a retail store or a stadium, creating a "zone" in which a person's precise location can be tracked via any mobile device equipped with BLE.

That sounds mildly creepy, but iBeacon does not draw any personal information from the mobile device. And there are lots of benefits, both for the customer and the business.

Let's assume we're talking about a large retailer with a lot of different products.

As a customer approaches the store and comes into range, an iBeacon-enabled app can deliver a greeting and any assortment of offers and recommendations.

If the customer is looking for a specific item, iBeacon can guide the customer not just to the right aisle, but to the exact spot where the product is located.

And as the customer browses the store, location-specific offers could pop up on his or her screen. For example, a deal on a certain brand of boots could pop up just as the customer enters the shoe department.

"We can find out where you are standing and how long you've been standing in front of the Michael Kors handbag and if you haven't purchased. And if you haven't, I'll send you a little note to give you encouragement to do so," Macy's Inc. (NYSE: M) Chief Executive Officer Terry Lundgren told Bidness Etc.

Macy's is just one of the big-name partners working with a startup called Shopkick that has created an app for retailers to leverage the iBeacon technology. Others include American Eagle Outfitters (NYSE: AEO), Safeway Inc. (NYSE: SWY), and Target Corp. (NYSE: TGT). So far the app has been downloaded 6 million times.

Of course, Apple also uses iBeacon in its own retail stores.

But iBeacon has uses beyond retail...

The iBeacon Opportunity for Apple Stock Is Huge

Other uses for iBeacon include museums and restaurants as well as attractions like amusement parks and zoos.

One pioneer in this area is Major League Baseball, which in the offseason equipped 20 of its ballparks with iBeacon technology that works with a free MLB-created app, "At the Ballpark."

The app includes a map and directory so fans can not only find their seats, but the nearest restroom, food vendor, or beer vendor. And as with retailers, MLB's iBeacon also can offer fans deals on food or club merchandise.

So it's clear that iBeacon is rapidly gaining traction. But how will this help Apple, and especially Apple stock?

The beacons themselves are cheap, and other vendors are selling them - this is an open technology anyone can use, which also means it can work with Android-powered devices (provided they have BLE) in addition to Apple's iPhones, iPads, and iPod Touches.

If Apple can link a payment system to iBeacon, it could take a percentage of sales or perhaps charge a small license fee for use of the technology.

This is a very tempting avenue, as Apple already has its Passbook app, which serves as a digital repository for such things as plane boarding passes and tickets to concerts.

Apple could easily add electronic payments to Passbook and pair it with its Touch ID technology for security and verification. People could purchase goods and services just by pushing one button, and they wouldn't need to be anywhere near a cash register.

Right now Touch ID is only on the iPhone 5s, but it will certainly be included in the iPhone 6 and almost as certainly on the next-generation iPod Touch and iPad Air.

"Apple is absolutely the sleeping giant in the payments world," Denee Carrington, an analyst at Forrester Research, told The Wall Street Journal. "They have the capability; they just haven't tied it all together."

And there's a second, less obvious way Apple could monetize iBeacon.

All that data on what customers are doing - where they browsed, what they bought, whether the customized ads that were beamed to the customer in-store produced any sales - is marketing gold. It's the sort of data that can help focus marketing campaigns, and companies would be willing to pay a lot for it.

"The concept is straightforward. An iBeacon sends out its ID constantly. When an appropriately configured smartphone is within range, it sends the ID into the cloud, which sends back the appropriate data. It fits into businesses looking to monetize Big Data on customers," UBS analyst Steven Milunovich wrote in a recent note to clients.

Finally, because Apple has been planning this for years, all of its mobile devices include BLE and work seamlessly with iBeacon, while only about one-third of Android devices do. As iBeacon services become more popular, that advantage also could help sell a few more iPhones.

Any way you slice it, iBeacon figures to be a major catalyst for AAPL stock.

Have you encountered iBeacon yet? If so, what did you think of it? Share your experiences on Twitter @moneymorning or Facebook.

UP NEXT: It may take a year or more for iBeacon's impact on Apple stock to make itself felt, but in the short term the major driver will be the iPhone 6. Here's why the iPhone 6 alone will push AAPL to a record high...

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