Apple Card May Bring New Customers, But Analyst Says Effect On Goldman Sachs Will Be Minimal

The release of the new Apple credit card by Goldman Sachs Group, Inc GS shows the legacy Wall Street firm’s interest into expanding into the world of the digital storefront, but is a small move that isn’t likely to be a game-changer for the venerable bank, or the industry, Wells Fargo said.

The Analyst

Wells Fargo’s Mike Mayo has an Outperform rating on Goldman Sachs with a $250 price target.

The Thesis

The card co-branded with Apple Inc. AAPL should provide a couple of positives for Goldman Sachs, Mayo wrote in a note to investors.

First, it could show that Goldman can leverage its well-known brand, and its tech savvy, to build a business from scratch with a partner. Second, it could expand the pool of potential customers, because more than 100 million Americans likely have an Apple product and could be in line to be solicited for the card. That jump-starts customer acquisition in the venture, often one of the most expensive parts of growing a consumer business.

“Goldman’s ability to start a business from scratch and partner with such an iconic brand should reflect its potential to out fin-tech the fin-techs and out-bank the banks,” Mayo said.

But the financials don’t show any way that the Apple Card contributes more than 3% of earnings or so, he said, so it’s “not likely to move the needle too much at Goldman.”

The card should be relatively attractive for consumers with a generous cash-back offer. But the overall utility to Goldman Sachs isn’t completely clear. Mayo noted Citigroup Inc C turned down the Apple Card, saying the economics wouldn’t work.

Price Action

Shares of Goldman Sachs were down 3.3% at $202.16 Monday afternoon.

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