Shares of Affirm Holdings (AFRM 2.24%), the buy now, pay later (BNPL) company, surged higher today as investors celebrated the expanded collaboration between the company and tech giant Apple.
Apple recently announced that Affirm's BNPL payment service will be integrated into Apple Pay, making it easy for users to use buy now, pay later loans directly through their iPhones and iPads later this year.
Affirm's stock was up 6.5% as of 2:44 p.m. ET.
Riding a wave of optimism
Apple debuted new artificial intelligence (AI) capabilities for its devices at the beginning of the week, including updates to Siri and even integration with OpenAI's ChatGPT. That sparked a positive response by Apple investors, who have pushed the stock up 12.6% since Monday.
Morgan Stanley, Evercore, and Bank of America analysts believe that Apple's new AI features could spur new device sales, resulting in a period of elevated sales called a "super cycle."
And this is where Affirm comes in. Investors are optimistic that the expansion of Affirm's BNPL loans into Apple Pay could benefit from the super cycle of Apple device sales and result in a boon for Affirm's loan business.
BNPL is still a big unknown
The BNPL market took off a few years ago as consumers were flush with cash from stimulus checks and enjoying low interest rates. But inflation and high interest rates have put a damper on the spending party, and Affirm has felt the effects.
The company's revenue surged 55% in fiscal 2022 but only increased 18% in 2023.
Inflation is cooling down and the Federal Reserve expects to make one interest rate cut later this year. But that might not be enough to boost consumer spending or send Affirm's BNPL loan into overdrive.
The expanded integration of Affirm's loan business into Apple Pay is a certainly a good step, but I wouldn't get too excited too quickly until we see whether or not it actually expands Affirm's top and bottom lines.
