CNBC’s Jim Cramer warned investors on Wednesday that if they own a purchase now, pay later shares, they should prepare for more damage to their portfolios.
“These stocks should never have been worth that much in the first place. Their business models were much more attractive when interest rates were incredibly low, but it remains to be seen if they work in a more normal environment,” Mad Mad said.
“Even though it does not look like it at the time, earnings mean something. Valuations mean something. The economic landscape, it means something. … That̵[ads1]7;s what we learned this year, and it would have been painful if you had fintech. “Exposure. I do not think the pain is necessarily over,” he added.
Buy Now, Pay Later Services, or BNPL, increased in popularity during the pandemic as consumers switched to online shopping. The space for BNPL companies has since grown, with companies such as Affirm, Block, Upstart, PayPal and Apple in close competition.
Cramer said the BNPL’s lift from the pandemic is long gone, especially as Wall Street worries about a looming recession and the Federal Reserve is fighting to beat inflation.
“By the time the Federal Reserve declared war on inflation in November, Wall Street was turning to growth, including the entire financial technology building,” he said.
“For more diversified payment games like Block and PayPal, they also had exposure to cryptocurrency trading, which has become an obstacle for them,” he added.
Cramer also pointed out that the BNPL shares are well below where they once were, and it is unclear whether they will recover.
“It’s been a heinous decline,” he said.
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