Buy now, pay later (BNPL) is a popular option for individuals interested in short-term financing. Its origins date back to the early 19th century when consumers were able to set up instalment plans to purchase goods like farming equipment. Despite being around for centuries, the BNPL train isn’t slowing down as more industries are beginning to offer their customers this option, from healthcare to insurance companies. One of the most recent examples is Apple, which announced last month that this feature will be added to iOS 16 soon. 

What Do We Know About Apple’s iOS 16 BNPL Feature?

iOS 16 is Apple’s latest mobile operating system, released publicly on September 12, 2022. The system promises deeper intelligence and enhanced personalisation features. Some of the most popular enhancements include lock screen editing and the ability to add widgets to your lock screen. The update also allows you to create a separate iCloud photo library and share it with up to five people.

Apple’s updated iOS 16 features page also highlights a buy now, pay later feature that will be added to the mobile operating system later. According to the fine print, qualifying customers in the United States can set up an instalment plan for a specific purchase, splitting it into four payments over six weeks. Customers will be able to access Apple’s BNPL feature in the Wallet app. 

What’s The Difference Between BNPL And Credit Cards?

Apple’s entry into the world of BNPL is noteworthy as it shows the tech retailer is trying to catch up to other companies who have already cemented their names in this sector, such as Adidas, Nike, Peloton, and Best Buy. It also demonstrates that Apple is still listening to consumers’ needs, desires, and actions. For instance, according to one survey, nearly 40% of consumers have tried a BNPL service at least once. That is a telling figure from a market research perspective, but it’s still less than half of all consumers in that study’s sample size, demonstrating there are still people who haven’t utilised this short-term financing option. 

A possible reason for this could be that these individuals don’t see the point since the features of BNPL are similar to traditional credit cards. While that’s true, since both allow consumers to buy goods and services and then pay for them over time, there are some key differences between the two. What consumers prefer depends on their needs and wants. 

Source: Pixabay

One of the most notable differences between BNPL and credit cards is that credit cards tend to have more incentives, such as rewards. Another difference between credit cards and BNPL is there are prerequisites for applying for a credit card since you have to have a specific credit rating to acquire one. Interestingly, that’s also one of the defining differences between credit and debit cards, since debit cards only require you to have enough money in your account due to charges being immediate. For more perspective, another difference between debit cards and credit cards is debit cards tend to be more restricted than credit cards. With credit cards, you can shop online, but unless your debit card has a Visa or Maestro logo, you won’t be able to make online purchases. 

Apple is making strides in the BNPL world by adding the feature to iOS 16. For people who are already fans of buy now, pay later, this news is bound to be welcomed with open arms. However, there may be people who would still prefer to use their credit cards to buy goods and pay later since credit cards offer more rewards. Keep in mind, though, there are differences between the two, just like between debit and credit cards, so make sure you do enough research on BNPL before writing it off completely. 

The FTSE 100 slipped beneath 7,000 on Tuesday feeling the impact of negative reactions to earnings updates from blue chips.

HSBC and Whitbread issued warnings on the economic environment pointing to inflationary pressures and headwinds which tarnished otherwise solid reports.

Indeed, both companies produced remarkably good revenue figures – but investors were more concerned with the outlook.

HSBC also said the Chinese real estate sector was a factor behind increased provisions for bad debts. HSBC shares were the FTSE 100’s top faller shedding over 7% at the time of writing.

“Concern about the impact of a slowing economy on bad debts and growth in the loan book is being exacerbated at HSBC by the departure of well-respected finance director Ewen Stevenson and the deteriorating situation in China,” said AJ Bell financial analyst, Danni Hewson.

Chinese exposure

One would be forgiven for thinking the FTSE 100’s performance is more a representation of the Chinese economy than it is the UK’s – and today is a perfect demonstration.

On a day the new UK Prime Minister sets about the jobs of increasing confidence in UK assets, the FTSE 100 falls due to concerns around the health of the Chinese real estate sector and overall Chinese economy.

Following disappointing Chinese retail sales data yesterday, HSBC raised concerns about the outlook of the property sector. This sent waves through FTSE 100 miners, and Standard Chartered who are reporting tomorrow.

Standard Chartered was down 4% while Rio Tinto, Anglo American and Antofagasta all sank, dragging the FTSE 100 with them.

Bargain hunting

The losses in stocks exposed to China was marginally offset by strength in many companies who have experienced a torrid 2022.

B&M European Value, down 50% year-to-date, gained 2.3% while JD Sports looked set to break a 6-day losing streak. JD Sports are down 55% year-to-date.

Whitbread saw revenue surge over 100% compared to last year and exceeded pre-pandemic levels as their expansion plans helped increase market share and strong performance versus peers.

Whitbread’s group statutory revenue rose 104% to £1.35bn, up from £661m the year prior. Revenue was also higher than the £1.08bn recorded in the period just before the pandemic.

“Whitbread’s Premier Inn has driven a strong first half performance. Its UK hotels are fuller than pre-covid levels, but not at the expense of room rates which have also been going up. This is testament to Premier Inn’s increasing market share as the independent hotel sector continues to decline,” said Derren Nathan, Head of Equity Research at Hargreaves Lansdown.

Despite bumper sales figures, Whitbread shares dipped on Tuesday as investors fretted about the impact of rising costs on margins. Whitbread said they expected margins to fall in H2 2023 as a result of inflationary pressures.

Nonetheless, analysts were upbeat on Whitbread’s growth strategy and a cash pile that will enable them to deliver on this strategy. Whitbread had £1.2bn cash and equivalents at the end of the period.

“The one fly in the ointment which seems to be preventing investors from getting too excited about any of these strengths is the surge in costs which Whitbread is facing. However, Whitbread has the financial resources to continue to invest in and grow the business despite these inflationary pressures,” said AJ Bell financial analyst, Danni Hewson.

HSBC shares failed to reap the benefits of rising net interest margins on Tuesday as investors chose to focus on concerns around economic headwinds, including uncertainties in the Chinese property sector.

The HSBC share price was down 6% to 445p at the time of writing.

Investors sold HSBC even though the global bank reported underlying profit that exceeded analysts expectations as the threat of provisions for an economic downturn proved too much of a negative for the market.

The resignation of Finance Director Ewen Stevenson also spooked markets on Tuesday.

“Concern about the impact of a slowing economy on bad debts and growth in the loan book is being exacerbated at HSBC by the departure of well-respected finance director Ewen Stevenson and the deteriorating situation in China,” said AJ Bell financial analyst, Danni Hewson.

“This explains HSBC serving up a better-than-expected set of third quarter numbers only to have the market effectively tell it to get stuffed.”

China Real Estate

There have been well documented problems in the Chinese real estate sector and these issues were apparent in today’s HSBC update. The bank increased the provisions for bad debt, attributing the ‘developments’ in mainland China as one of the reasons for setting aside capital for potential defaults.

This offset some of the surge in revenue’s due to higher interest rates.

Higher Interest Rates

Worries about future provisions even overshadowed a positive outlook for net interest income which HSBC said they expected to be $32 billion in 2022.

Banks are a major beneficiary of higher interest rates which was evident in today’s update from HSBC. HSBC’s Net interest margin rose to 1.57%, a gain of 38 basis points. This helped third quarter adjusted revenue rise 28% to 14.3bn.

“Banks reap rewards when interest rates increase, because their net interest margins, which show the difference between how much a bank earns in interest on loans, compared to what it pays on deposits, soar. That’s exactly what we’ve seen play out at HSBC in the third quarter, and expectations for 2023 also include plumped up net interest income, as the bank sits in anticipation for further rate rises from central banks,” said Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown.

“However, it’s not as simple as saying the current situation is a net win for the financial sector. The rising interest rate environment makes the economic outlook very challenging, and sharp financial contractions are painful for bank”

Times of opportunism can produce profits for versatile investors.

Now could well be the time, for such market players, to jump into the shares of one company that I really like ahead of its figures being published.

Last week DX (Group) (LON:DX.) came back to the market after its shares were suspended ten months ago.

Inability to publish its 2021 Annual Report inside the statutory six-month timeframe allowance brought about the suspended dealings.

It also did not help that its previous auditors were concerned over certain corporate governance issues and a resulting inquiry.

However, that all seems to have been sorted out, certainly sufficient for the group’s shares to be requoted on the market.

Some 47 years old

Established in 1975, DX is a market leader in the delivery of mail, parcels, pallets and freight of irregular dimension and weight.

The group, which provides a wide range of specialist delivery services to both business and residential addresses across the UK and Ireland, operates through two divisions, DX Freight and DX Express.

DX now provides one of the widest ranges of overnight delivery services in the market, as well as logistics services. 

Items that DX transports range from confidential documents and valuable packages to large, awkward-to-handle freight, unsuitable for automated conveyor.

Progress during the suspension

With the inquiry and investigation having been concluded, with several important improvements having been made in procedures and training, it is impressive to see that it has clearly not affected the group’s short-term trading.

DX Freight has continued to make strong progress driven by continued market share gains backed by its strong service levels and with price rises offsetting cost pressures wherever required. 

Encouragingly the DX Express side has returned to sales and profit growth, having been supported by the successful expansion of the Parcels business. 

Outlook – stronger growth

The company expects to report the financial results for the year ended 2 July 2022 in the second half of November.

It is now reasonable to expect that the high service levels combined with additional investment into sites, equipment and information technology will help to drive stronger growth into the long term.

Analyst Opinions – price targets ranging 45p to 57p share

Analyst Guy Hewett at finnCap, the company’s NOMAD and joint broker, has estimates out for the last year to have shown revenues improving from £382.1m to £425.0m, while adjusted pre-tax profits could come in at £20.0m (£12.2m) generating earnings of 2.8p (2.0p) per share.

For the current year he is going for £457.0m sales, £25.0m profits, earnings of 3.4p and even a 1.5p dividend per share.

He is even more bullish for 2024. Prior to the return from suspension, he had a 57p Target Price out on the shares, however I think that he may cautiously temper that objective.

Over at the other joint broker, Liberum Capital, their analyst Gerald Khoo considers that the group’s shares have attractive fundamentals, while the company is resilient in its trading.

He has £426m sales for the last year, £19.6m profits and 2.6p in earnings per share.

For this year his figures suggest £450.0m revenues, £25.4m profits, earnings of 3.3p and a similar 1.5p per share dividend. 

Cautiously he has a Target Price of just 45p.

Conclusion – as ‘locked-ins’ get out then just jump right into a bargain

Awaiting the actual final results being published towards the end of next month I would expect to see the group’s shares gyrate somewhat in price, as locked-in holders liquidate positions out of necessity.

They returned from suspension at 30p and have since fallen back to the current 22p. 

After frenetic dealings upon its return last week, the market has now levelled out and looks ready for an uplift.

That is why I suggest that adventurous investors should now take a view on the group’s shares climbing back up to, and hopefully above, the 34p peak of last November, they are certainly worth a lot more in price.