Bank of America Thinks This Buy Now, Pay Later Stocks Could Soar
Keep an eye on buy now, pay later (BNPL) stock, like Affirm Holdings (SYM: AFRM).
According to Bank of America analysts, now is the time to buy.
They argue that Affirm has an “achievable” plan to boost profits, and should also benefit from the Federal Reserve’s interest rate cuts.
“A lower interest rate environment would be beneficial to AFRM’s funding costs and for gain on loan sales,” the analysts said, as quoted by CNBC. “AFRM recently moved its merchants to a 36% APR cap on loans, up from 30% previously, which should remain a tailwind for yields and GMV [gross merchandise value] growth.”
Helping, earlier this month, Goldman Sachs just initiated coverage of the stock with a buy rating with a price target of $42 a share. “We view AFRM as the leading provider of modern credit solutions for consumers, with a diverse portfolio of products for point of sale financing, and everyday spending,” said the firm, as quoted by Seeking Alpha.
Two, Americans are spending billions of dollars with BNPL – especially online.
As noted by Fortune, “U.S. consumers spent $331.6 billion shopping online in the first four months of 2024 alone, according to a report released by Adobe Analytics. That’s 7% more than a year ago, and importantly, the online spending was driven by new demand, not higher prices. Adobe’s researchers explained that e-commerce prices actually dropped 5.6% from a year ago in April. That means if their figures were inflation-adjusted, the percentage growth figure for Americans’ online spending would have been even higher.”
Millions of Americans are also using BNPL to buy groceries.
In fact, thanks to inflation, about 15 million people, or 6.5% of the U.S. population is using BNPL. And according to the Federal Reserve Bank of New York, people with a credit score of under 620 were three times as likely to use BNPL multiple times a year.
Related reading: PayPal’s AI breakthrough?
In the late 1990s, when most people were still mailing checks, Musk’s idea of making payments over the Internet was unimaginable.
Now, though, PayPal is a promising contender in the ever-competitive and ever-advancing AI boom.
PayPal is applying AI-derived insights from its vast customer base to optimize the checkout process for merchants and consumers.
Specifically, PayPal AI significantly reduces both false negatives (declines) and false positives (fraudulent charges) during the checkout process.
The secret sauce that makes this industry-leading error prevention possible is a PayPal solution that combines AI and machine-learning capabilities with its extensive data sets.
PayPal heavily relies on this adaptive machine learning solution called PayPal Fraud Protection Advanced to detect and nullify fraudulent transactions.
But that’s just the beginning. PayPal also expects AI to play an increasingly important role in its own operations.
As PayPal CEO Dan Schulman says…
“We are just at the beginning of a multi-year efficiency journey…With the new advances of generative AI, we will be able to accelerate our productivity initiatives. We expect AI will enable us to meaningfully lower our costs for years to come… I think there’s no question that AI is going to impact almost every function inside of PayPal, whether it be our front office, back office, marketing, legal, engineering, you name it.”…
So, I expect PayPal’s current discounted valuation to disappear as the company enters a new growth phase – and as its AI capabilities fatten the profit margins on that growth.
Like I said before, PayPal was not a popular idea at first…
Really, it seems that everything Musk has done throughout his career sounded insane at first. Which leads me to his latest, strange invention…
It’s an AI device that could be the most powerful technology ever created. This new idea is set to shock the world once again – and this time, you don’t want to be a nonbeliever.
