💳 Apple Cancels its Buy Now, Pay Later Service

MARKET UPDATE

Good Morning Investor! No significant market moves took place on Wednesday as the markets were shut for the Juneteenth holiday.

TODAY’S BIG HEADLINES

Apple Cancels its Buy Now, Pay Later Service

Is Cava’s Growth Causing its Own Demise?

McDonald’s to End its Successful AI-Powered Drive-Thru

MEGA CAPS & FINTECH

Apple Cancels its Buy Now, Pay Later Service💳

Stick to Making Phones Buddy: Apple ($AAPL) has officially and rather abruptly ended its buy-now, pay-later (BNPL) scheme, Apple Pay Later, much to the delight of its fintech competitors. The service operated similarly to Klarna and Affirm ($AFRM), allowing customers to split payments into interest-free monthly installments. But now, the iPhone maker is returning to more traditional payment methods, proving that even big tech titans can't hit a home run every time.

• The project unraveled due to several issues, including regulatory pressures and a less-than-smooth partnership with investment bank Goldman Sachs ($GS).

• This announcement follows increased regulatory oversight on BNPL services, requiring companies like Affirm, AfterPay ($SQ), and PayPal ($PYPL) to be treated as credit card companies. It seems the regulatory beast was too much for Apple to tame.

Pick of the Bunch: One beneficiary of Apple's retreat is BNPL firm Affirm, which will partner with Apple to offer Apple Pay Later in the future. This move helps Apple sidestep regulatory hurdles while continuing to work with banks for traditional payment services.

• Apple's new approach indicates a preference for letting partners handle the lending, while it sticks to what it does best: making cutting-edge gadgets and dazzling us with tech wizardry.

• Thanks to this strategic pivot, Apple Pay customers will soon be able to apply for loans from banks and lenders in Australia, Spain, the UK, and the US for in-app or online purchases.

• This shift means Apple Pay will have a broader global reach and offer more options, with the expanded services set to launch this fall.

RESTAURANTS

Is Cava’s Growth Causing its Own Demise?🥗

Leafy Ascendance: Cava ($CAVA), the leafy green sensation dubbed the “Mediterranean Chipotle,” has been on an IPO tear that’s left even the hottest AI and cloud computing firms in the dust. Since its debut last June, the stock has skyrocketed 300%, giving the company a sizzling $10 billion valuation. Move over, burritos—Cava’s here to wrap up the competition!

• With 323 restaurants under its belt, Cava's valuation per restaurant sits at a whopping $33 million. That’s a whole lot of hummus compared to Chipotle’s ($CMG) $3 million per restaurant.

• This lofty valuation and revenue per location have prompted investment firms like JPMorgan and Piper Sandler to downgrade the stock. Apparently, even in the stock market, you can have too much of a good thing.

• Shorting the Bowl: Upright Analytics CEO Lauren Balik isn’t buying the hype—in fact, she’s shorting $CAVA over concerns about quality assurance.

Leaving the Nest: Despite the company opening 50 new locations last year without major issues, Balik points to risks like E. coli contamination in Cava’s ground lamb meatballs, which customers have complained are often undercooked. It’s a classic case of “buyer beware,” or in this case, “eater beware.”

• Balik’s skepticism doesn’t stop at undercooked meatballs. She also worries about Cava’s expansion into catering and its presence near college campuses, which she believes could lead to serious operational hiccups.

• Despite the company’s rapid growth, these concerns could pose significant challenges to maintaining their leafy green empire.

RESTAURANTS

McDonald’s to End its Successful AI-Powered Drive-Thru🍔

Drive-Thru Dramas: McDonald’s ($MCD), the reigning champ of burger flipping, recently teamed up with tech titan IBM ($IBM) to roll out an AI-powered drive-thru at 100 US locations. It was a hit, like finding extra fries at the bottom of the bag. But in a plot twist worthy of a soap opera, the golden arches are pulling the plug on this high-tech scheme and looking for a new partner faster than you can say "supersize me."

• AI Still on the Menu: Despite the breakup, McDonald's isn’t swearing off AI. Management has assured analysts that a voice-ordering solution is definitely in the chain’s future. The current setup will be winding down by July 26th, but the hunt for a new AI partner is on. It’s like a reality dating show, but with robots and cheeseburgers.

New Tech Partners on the Horizon: Who will McDonald's court next in its quest for the perfect AI partner? Expanding its current partnership with AI powerhouse Google ($GOOG) is a no-brainer. Alternatively, they might woo Soundhound ($SOUN), which has built similar systems for rival chains—assuming they’re not locked into exclusive relationships. It’s a tech love triangle with fries on the side.

• One of the biggest reasons behind AI’s growing presence in fast food is the skyrocketing cost of labor. California’s new minimum wage law, setting a $20 per hour floor for fast-food workers, has only added fuel to the fire. AI doesn’t need breaks or benefits, making it an attractive option for chains looking to cut costs.

• Despite the seemingly simple task of taking an order, perfecting a voice-order service has proven tricky. Even fast-food rivals like Wendy’s ($WEN) and White Castle have their own AI systems but have been caught outsourcing the job to human workers posing as robots. It seems the fast-food AI revolution still has a few bugs to iron out before it’s ready for prime time.

MORE NEWS

Additional market-moving events🌎

Microsoft Targets Adept: Adept, a two-year old AI startup that has raised more than $400 million in funding, has been in talks with Microsoft. (Fortune)

Meta’s Wearables Group: Meta’s Reality Labs is undergoing its biggest restructuring in years by separating into two orgs: Wearables and Metaverse. Additionally, a small number of employees have been laid off. (The Verge)

UK’s Inflation Celebration: The UK’s headline CPI figure has now dropped to the Bank of England’s target 2 rate. Despite this, it’s unlikely that the bank will cut interest rates yet. (CNBC)

Britain’s Latest BNPL: Klarna rival Zilch raises $125 million with aim to triple sales and accelerate path to IPO. (CNBC)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500. Then on the 10th of June we released our next stock selection.

Here’s how the three stocks have performed since:

• Evolution AB: 1,086.00 SEK (📉-17.25%)

• Hims & Hers Health: $25.59 (📈+76.81%)

• PayPal: $59.18 (📉-8.63%)

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