Apple has decided to terminate its buy now, pay later (BNPL) service, Apple Pay Later, just over a year after its launch, signaling a strategic pivot towards artificial intelligence (AI) as its primary growth driver.
The company’s website announced on Monday that it would cease offering new loans through Apple Pay Later, though existing loans will remain unaffected. Apple Pay Later allowed users to split purchases made via Apple Pay through the Apple Wallet app on iPhones and iPads into four interest-free, fee-free payments spread over six weeks.
In place of its own BNPL service, Apple plans to facilitate applications for such loans from third-party providers when users check out with Apple Pay. Affirm Holdings saw a stock increase earlier this month after Apple disclosed that Affirm’s products would soon be available to Apple Pay users in the U.S. Citigroup and Synchrony Financial are also set to be involved in this new rollout, according to Apple.
The move away from BNPL indicates a broader strategic shift for Apple, with a renewed focus on embedding AI capabilities into its devices. Recent AI-related announcements at the Worldwide Developers Conference (WWDC) have buoyed Apple’s stock, which has risen 13% over the past month. Analysts are optimistic that these advancements will drive increased iPhone sales.
J.P. Morgan analyst Samik Chatterjee projects Apple’s iPhone shipments will reach 250 million units in 2025, up from 228 million this year, with a further increase to 275 million units expected in 2026.
“Our expectations for the AI-led upgrade cycle are bolstered by the range of features outlined at WWDC across a broad portfolio of native apps, and thus we are raising our expectations for [iPhone] volumes,” Chatterjee noted in a research report on Tuesday.
In line with this positive outlook, Chatterjee has raised his target price for Apple stock from $225 to $245 while maintaining an Overweight rating.
Nevertheless, some analysts caution that Apple’s stock may be approaching full valuation. Helena Wang, an analyst at Phillip Securities, downgraded Apple to Neutral from Accumulate, citing recent share price increases. Despite this, she revised her target price upward from $194 to $220.
Key Takeaways
- Apple is ending its Apple Pay Later service just over a year after launch.
- The company is shifting focus to AI, leveraging new capabilities announced at WWDC.
- Apple will support BNPL services from third-party providers like Affirm, Citigroup, and Synchrony Financial.
- Analysts project significant increases in iPhone shipments due to AI integration.
- Apple’s stock has seen a 13% rise in the past month, with mixed opinions on future valuation.
Conclusion
Apple’s strategic pivot from BNPL services to AI integration highlights its ongoing evolution in response to technological advancements and market demands. As the company enhances its AI capabilities, it aims to drive growth through increased iPhone sales and innovative applications, positioning itself at the forefront of technological innovation. However, the mixed analyst perspectives on stock valuation underscore the need for cautious optimism among investors.
