What happened
Shares of Affirm Holding (AFRM -0.16%) tumbled today on news that Apple (AAPL -0.81%) was launching a rival "buy now, pay later" (BNPL) service. According to Bloomberg, Apple will be partnering with Goldman Sachs on the project, currently known as Apple Pay Later.
Investors, fearing competition from the world's biggest company, sent Affirm shares lower. They closed down 10.5%.
Image source: Affirm.
So what
Affirm has been one of the pioneers of "buy now, pay later," a financing product that resembles credit cards but partners with merchants to allow consumers to pay in simple installments. Apple aims to offer its installed base of over 1 billion customers a similar product, which it hopes will spur adoption of Apple Pay and further grow its services business.
Apple has been focused on building out services, as they're generally high-margin businesses and help to lock in its customer base. Affirm stock fell sharply at 2 p.m. EDT when the news broke.
It's unclear to what extent Apple will be competing with Affirm, as the product hasn't yet launched. Affirm has had success in part by becoming a preferred provider with merchants, who often advertise its financing services, and that may help give it an edge over the iPhone maker.
At least one analyst thought the sell-off was overdone. Truist analyst Andrew Jeffrey called the sell-off an overreaction, arguing that the industry is already competitive and noting Affirm's strength with merchant integrations. Jeffrey maintained a buy rating and a price tag of $82 on the stock.
Now what
Affirm stock has already experienced plenty of volatility since its January initial public offering (IPO), as the stock doubled on its first trading day and reached an all-time high of nearly $150 in February. However, the stock quickly gave up those gains on fears of rising interest rates and a broader rotation out of growth stocks, and has fallen 60% since then.
The Apple news shows that Affirm's volatility isn't going anywhere. Expect the fintech stock to continue to respond to news about the Apple Pay Later launch, especially as the BNPL industry is still new and investors are uncertain about the overall growth or durability of the sector.
