makes great strides towards being a finance company, and it crushes the shares
Apple (ticker: AAPL) announced on Monday that it would soon offer a buy now, pay later product called “Apple Pay Later.” The news was enough to send Affirm shares down 5.5% on the day of the announcement, but many on Wall Street saw Apple’s new product as a support for BNPL’s popularity rather than a threat to existing players.
That all changed on Thursday as more details about Apple’s plans leaked out. While Apple has worked with banking partners in the past, the financing of these new loans will be handled through a wholly owned subsidiary Apple has created called Apple Financing LLC.
This new detail makes Apple’s offer seem more like a springboard that the technology giant is taking towards becoming a bank versus an additional product for the Wallet app.
“Apple undoubtedly has the balancing power to pursue a bank charter, but we believe they will continue to go all the way up to the line without ever crossing into the territory that would require a charter,” Amit Daryanani, an analyst at Evercore ISI, wrote in a note. Thursday.
Shares of Affirm (AFRM) and Block (SQ), formerly known as Square, fell more than 9% in Thursday’s trading.
Representatives from Affirm declined to comment on Thursday’s stock movements. In a statement on Monday, Affirm said: “Even though more players are joining the movement we started, the prize remains massive, and Affirm is well positioned to win. We simply do not believe that anyone can do what our team and our technology can do. “
Block spokespersons did not immediately respond to requests for comment.
The fall in block shares was striking because the company had so far avoided much of this week’s Apple-induced sales. Block is a diversified digital payment company, but it delved deeper into BNPL with the acquisition of Australian-based Afterpay earlier this year.
Affirm focuses on BNPL in the United States. Shares rose during the pandemic, but are declining by more than 70% from the peaks in November as investors worry about a weakened economy and the Federal Reserve’s move to raise interest rates.
Affirm, founded in 2012, realized that consumers were interested in a service that would allow them to split the cost of large ticket items without the risk of incurring high interest rates on revolving debt found with credit cards. One of the more popular products offers free loans with zero percent interest spread over four payments every two weeks. It is a product that is now offered at other fintechs and banks.
Someone on Wall Street welcomes the competition – even from Apple.
“While more competition is theoretically negative, we believe Apple is validating the market and offering a fundamentally different – and in many ways worse – solution,” Andrew Jeffrey, an analyst at Truist, wrote Thursday. He considers shares a purchase and has a price target of $ 55 on the share.
Affirm shares closed at $ 21.18 on Thursday.
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