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Zip Co (Z1P) $7.32 & Afterpay (APT) $107.00

ZIP -11.38%, APT -9.59%%: the sector was hit today on news overnight that Apple (APPL US)  is in the process of  building into Apple Pay an instalments payment product that will directly compete with Z1P, APT and the other BNPL companies. While there a few different considerations here, ultimately having a well-capitalized respected brand with a huge digital / mobile footprint enter the space is major validation however it’s also a major competitive threat. At this stage, we know that there will be a buy in 4 product plus a longer term alternative that will incur interest payments and it will be pushed to the ~6.4m Americans that have current Apple Card accounts.The move from Apple follows Paypal  (PYPL US) ~12 months ago taking a similar step.  

Clearly the major players are taking notice of the huge adoption of BNPL which in the US at least is still in the early stages of adoption in what is a huge market that is more ‘tech savvy’.  We think the outlook is still very positive for the sector overall, however today’s news reduces our conviction in the short term as focus returns to margin pressure.

MM owns Zip (Z1P) in both the Flagship Growth & Emerging Companies Portfolio while we also hold Apple (AAPL US) & Paypal (PYPL US) in our International Equities Portfolio. We are reviewing our weightings towards Z1P in light of this news. NB: Z1P should be out with a quarterly update tomorrow or Friday, and it should be a strong one in MM’s view.

ZIP
MM is now neutral the BNPL sector
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