Affirm: The Benefits of Investing in it Now

Affirm Holdings Inc


  • Affirm shares are trading within a narrow range.
  • Strong quarterly results and fair outlook discussed.
  • Apple’s competitive risks cited.

The stock dipped after the release of Affirm’s (NASDAQ:AFRM) quarterly results in May. However, after falling to a low of $13.64, the stock rallied back to its 50-day simple moving average at approximately $30. Recently, AFRM stock closed at $23.84. 

The supplier of buy now, pay later posted earnings, revenue, and gross merchandise volume that exceeded expectations. Its outlook spooked investors. Shareholders are nervous despite the potential for the BNPL market to be worth $900 billion in 2021.

Is it worth buying AFRM stock now that it has consolidated around the $20 – $24 level since mid-May 2022?

A Strong Third Quarter Quarter, But A Weak Outlook

Affirm (NASDAQ:AFRM) reported a GAAP EPS loss of 19 cents. Revenue skyrocketed by 53.8% Y/Y to $354.8 million. GMV grew by 73% to $3.9 billion. The company anticipates reaching income profitability on a run rate basis by the end of its fiscal year 2023.

The revenue outlook for Affirm (NASDAQ:AFRM) is in the range of $345 million to $355 million, which is marginally lower than the consensus estimate. Moreover, its $1.33 billion to $1.34 billion revenue for fiscal 2022 is within consensus estimates. Despite its positive quarterly results and outlook, the markets overlook this stock. Bears have a substantial short interest against AFRM stock, at 16.55%.

Bears are not only targeting Affirm (NASDAQ:AFRM) stock. Sofi has a short interest of 18%. By comparison, the short float on Block is 7.71% and just 2.03% for Visa. According to experts, bears may rely on weak profitability. Even so, its valuation score of “C” and growth score of B- should be a concern for short-sellers.

The company announced on July 4th a partnership with SeatGeek, which means consumers may buy and sell tickets for live events. In addition, they will have various payment options at the checkout. More importantly, fans can make monthly and up to four interest-free biweekly payments.

BNPL Is A Growth Driver During Recession

Affirm (NASDAQ:AFRM) announced in its recent investor presentation it had $13 billion in GMV in 2021. BNPL’s growing e-commerce market share will lead to sustained profitability through 2025.

It is expected that by 2025, the company will have an 8.5% share of BNPL compared to 3.8% in 2021. Granted, the recession will likely reduce the estimated $1.5 trillion in e-commerce spending. Still, companies will depend on their online business to lower costs. As a result, the size of the online market should continue expanding despite the current recession.

Amazon accounts for 41% of online sales, followed by Shopify at 10.3% and Walmart at 6.6%. With them as integrated partners, Affirm’s (NASDAQ:AFRM) business will thrive. In the last quarter, Amazon cut hiring and investments in its warehouse. Walmart realized it had excess inventory for goods consumers weren’t interested in. Other than splitting its stock to make it more affordable, Shopify alerted investors of increased costs. Shopify acquired Deliverr for $2.1 billion. Its investments in global logistics will benefit its independent brand customers.


Peloloton’on’s decelerating business momentum is still hurting the market. This hurts Affirm’s (NASDAQ:AFRM) considerable purchase support for customers. As the recession unfolds, customers will be more mindful of applying for credit. To avoid higher costs, they will consider Affirm’s (NASDAQ:AFRM) business instead.

Affirm (NASDAQ:AFRM) will fund its business in several ways. First, it will have floating rate warehouse financing. It will fund its business with a securitization program. In its forward flow funding, it will sell loans to counterparties. Those loans will have an extended duration of up to 24 months.

Affirm (NASDAQ:AFRM) will stagger its securitization maturity durations. It will have plenty of near-term visibility. Furthermore, its business will be sensitive to the short-term end of the debt curve. This minimizes the risk of the Federal Reserve’s continued interest rate hikes.

According to Wall Street, the average price target is $35.50. The highest price target is $80.00.


Apple’s launch of Apple Pay Later is a potential risk. Investors are speculating on what the product looks like. Still, Apple’s entry into the BNPL market validates Affirm’s (NASDAQ:AFRM) business model. In addition, Apple will target customers with high income and strong credit scores. Chances are good that Apple’s Pay Later market will not overlap with that of Affirm’s (NASDAQ:AFRM) target customers.

Chief Financial Officer Michael Linford said there is not much overlap between the planned implementation and Apple’s service. Affirm (NASDAQ:AFRM) integrates with leading technology platforms. Amazon, Shopify, and Walmart are dominant players in the e-commerce market.

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