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Buy Now, Pay Later (BNPL) loans have become increasingly popular in recent yearsoriginations grew tenfold between 2019 and 2021, for instance. Last year, roughly 20% of American consumers used one to make a purchase. Despite their increasing usage, BNPL loans are still not used to calculate credit scoreswhich may have effects for lenders, and could be costing some consumers with good credit habits some valuable points. FICOthe creator of the FICO Score which is used by 90% of U.S.-based lending institutions to make lending decisionsrecently published an analysis in tandem with the BNPL company Affirm to get a sense of what the results would be if those loans were used to calculate FICO scores. The results? Mostly good for both consumers and lenders. The analysis looked at data from a 12-month period and compared the FICO scores of more than 500,000 people who used Affirm to open a BNPL loan against those who had not. FICO then simulated the inclusion of the BNPL data into its model and found that most people saw an increase or no change in their credit scores. Affirm gave us data that would be the same data they would furnish to a credit bureau, says Julie May, vice president and general manager of B2B scores at FICO. With the simulated study, we would see positive benefits for approximately two-thirds of consumers, particularly for those with utilization of five or more BNPL loans, she says. In all, incorporating BNPL loan data into credit scoring models would benefit consumers, and the lenders who use the FICO score to make lending decisions, she says. In all, the analysis found that using the BNPL data to generate a FICO score was generally consistent with the opening of a new account, with a slight (plus or minus 10 points) change in their score for 85% of the individuals analyzed. For those who have better credit habitssuch as making on-time payments, and keeping their overall credit utilization lowthe BNPL data helps increase scores to a degree. With the simulation complete, May says that FICO will be looking to roll out a new FICO scoring model in the future that will incorporate BNPL data, effectively the first model to do so. We know what the actual solution would be; were in final discussions with stakeholders in terms of how that would roll out, she says. Theres no hard date yet, but May adds that when it does ultimately happen, FICO is excited to introduce the proprietary technique to the marketplace.
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E-Commerce
Advanced Micro Devices (AMD) stock (NASDAQ: AMD) fell 9% before the bell on Wednesday after the company fell short on sales for its data centers, despite reporting better-than-expected fourth-quarter earnings. (The stock is down 7% as of midday Wednesday.) That’s because the chipmaker’s core business is selling data center chips for graphics processing units used to power AI. It’s currently going head-to-head with Nvidia for market share of the lucrative, high-powered AI chip market. Shares in Nvidia (NVDA), meanwhile, were up 4% in midday trading Wednesday after Google’s parent company, Alphabet, announced it will spend $75 billion in expected capital expenditures in 2025, a majority of which will go into building data centers and servers in an effort to help Google increase its AI capabilities. On Tuesday, AMD reported Q4 revenue that came in at $7.66 billion, beating estimates of $7.54 billion, and an adjusted earnings per share (EPS) of $1.09. Looking ahead to the first quarter of 2025, the chipmaker forecast revenue coming in between $6.8 billion and $7.4 billion. On its earnings call with investors, CEO Lisa T. Su told investors the company sees strong double-digit percentage revenue and EPS growth for 2025, calling 2024 “a transformative year for AMD . . . [when we] successfully established our multibillion-dollar data center AI franchise, launched a broad set of leadership products, and gained significant server and PC market share.” Also on Wednesday, Truist Securities analyst William Stein reduced the company’s price target to $130 a share, down from $145. At the time of this writing, AMD stock was trading at $109.58, near its 52-week low.
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E-Commerce
The Walt Disney Company posted first-quarter earnings Wednesday that beat on the top and bottom lines but also revealed the start of predicted streaming subscriber losses at its Disney+ service. The service lost 700,000 subscribers over the final three months of 2024, which is the first quarter of Disney’s fiscal year 2025. The media and entertainment giant had warned during its fiscal fourth-quarter report in November that it expected a modest decline in core subscribers during the first quarter of 2025. Hulu picks up the streaming slack Total paid Disney+ subscriptions currently rest at 124.6 million compared with 125.3 million at the end of the fiscal fourth quarter. ESPN+ also saw a loss of 700,000 subscribers, currently at 24.9 million, compared with 25.6 million at the end of last quarter. Though Disney saw losses at Disney+ and ESPN+, total Hulu subscriptions rose to 53.6 million, compared with 52 million at the end of the fiscal fourth quarter. The decrease in subscribers came as a result of an increase in prices that Disney announced in August of 2024. The price rose to $9.99 with ads and $15.99 with no ads, following its announcement of continuous playlists and growing offerings. Disneys earnings beat underscores the success of its cost-cutting initiatives and resilient performance in parks and studios, offsetting headwinds in streaming,” Jesse Cohen, a senior analyst at Investing.com, said in an emailed statement. However, the surprising loss of Disney+ subscribersthe first decline since its 2019 launchraises red flags about saturation in a crowded market and the trade-offs of its pricing strategy.” Disney’s stock was down around 1.5% Wednesday in afternoon trading. Theme parks hampered by extreme weather Disney’s domestic parks and experiences business saw a decline of 5% in operating income due to hurricanes and cruise preopening expenses. However, it did see operating income increase 28% for international parks. Although Disney lost subscribers for Disney+ and saw a decline in domestic park attendance, net income increased nearly 23% to $2.64 billion, compared to $2.15 billion during the same quarter last year. Revenue increased 4.8% to $24.69 billion compared to $23.55 billion from last year. Our results this quarter demonstrate Disneys creative and financial strength as we advanced the strategic initiatives set in motion over the past two years, said CEO Robert Iger in a statement. The company’s success was thanks in part to box office performance from its studios, which had the three top movies in 2024: Inside Out 2, Deadpool & Wolverine, and Moana 2. Moana 2, released during Q1, grossed more than $1 billion, which was a driving factor behind the improvement in operating results. In its sports-content segment, Disney saw a 13% operating-income growth. The increase came as a result of college sports and one additional NFL game, as well as Disney’s exit from the Venu Sports, the planned sports-focused streaming service that Disney and other media giants discontinued earlier this year. The company plans to launch its own direct-to-customer streaming app for ESPN this fall, company executives said on a conference call Wednesday. Disney’s streaming business may continue to face headwinds in a crowded marketplace, particularly among price-conscious viewers. “While profitability in streaming improved, the subscriber dip suggests price hikes or content gaps may be driving churn, particularly as rivals like Netflix and Amazon Prime retain momentum, Cohen said. Disney told investors on Wednesday that it expects another decline in subscribers during the second quarter.
Category:
E-Commerce
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