Affirm Holdings Inc. is a pioneer of the buy now, pay later (BNPL) industry, which allows consumers to split purchase costs over multiple installments without paying interest or fees. Affirm was founded in 2012 by Max Levchin, a co-founder of PayPal and a serial entrepreneur. Levchin is still the CEO and chairman of Affirm. The company is based in San Francisco, California, and Affirm market cap is $4.46 billion as of June 2023.
Affirm has achieved remarkable growth since its launch in 2012, becoming a leading provider of buy now, pay later (BNPL) solutions in the US. The company has partnered with over 240,000 merchants across various categories, such as Peloton, Walmart, American Airlines, and Shopify. In January 2021, Affirm went public on NASDAQ, raising $1.2 billion in its IPO. The same month, it acquired PayBright, a Canadian BNPL provider, for $264 million. In March 2021, Affirm launched Affirm Card, a physical debit card that allows users to pay with Affirm anywhere. In April 2021, Affirm announced a partnership with Shopify to power Shop Pay Installments, a BNPL option for Shopify merchants and buyers. In May 2021, Affirm acquired Returnly for $300 million. In May 2022, Affirm became Amazon's exclusive BNPL partner in the US through January 2023. In the same month, Affirm signed a partnership with Stripe to make its adaptive checkout service available to Stripe users in the US.
Affirm's revenue comes from four segments: Core Platform Revenue (which includes merchant network revenue and interest income), Interest Expense (which includes interest expense on loans payable and securitization debt), Provision for Credit Losses (which reflects expected losses on loans originated by Affirm), and Other Revenue (which includes revenue from virtual cards and other sources).
Affirm Holdings Inc.'s Business Model and Products/Services
Business Model
Affirm's business model is based on providing point-of-sale financing that allows consumers to split purchase costs over multiple installments. Affirm charges merchants a fee for each transaction processed through its platform. Affirm also earns interest income from some consumers who choose longer-term loans with interest rates ranging from 0% to 30% APR.
Affirm's value proposition for merchants is that it can increase conversion rates, average order values, customer loyalty, and repeat purchases. Affirm claims that its merchants see an average increase of 85% in average order value and an average increase of 20% in conversion rates compared to other payment methods.
Affirm's value proposition for consumers is that it can offer transparent and flexible payment options that fit their budgets and preferences. Affirm does not charge any late fees or hidden fees to consumers. Affirm also provides consumers with financial education tools and features such as savings accounts and spending insights.
Affirm's competitive advantage lies in its proprietary technology platform that leverages data science and machine learning to underwrite loans in real time based on various factors such as credit history, purchase behavior, device type, and social media activity.
Main Products/Services
Affirm's main products and services include:
● Affirm Pay: A BNPL option that allows consumers to pay for purchases over 3, 6, 12, or 18 months with interest rates ranging from 0% to 30% APR.
● Affirm Card: A physical debit card that allows consumers to pay with Affirm anywhere. Consumers can pay in full or over time with Affirm Pay at checkout.
● Affirm App: A mobile app that allows consumers to shop with Affirm at any online store, manage their payments, access savings accounts, and get personalized offers and rewards.
● Affirm Savings: A high-yield savings account that offers a 0.65% APY with no minimum balance or fees. Consumers can also set up automatic transfers and round-ups to save more money.
● Affirm Virtual Card: A virtual credit card that allows consumers to buy from any online store while paying over time with Affirm Pay. Consumers can generate a one-time-use card number in the Affirm app and use it at checkout.
Affirm Holdings Inc.'s Financials, Growth, and Valuation Metrics
Affirm stock earnings
Affirm's financial performance has been impressive in recent years. The company's revenue has grown from $0.66 billion in 2020 to $1.48 billion in 2022, representing a compound annual growth rate (CAGR) of about 31%. Affirm's revenue growth has been driven by expanding its merchant network, increased active consumers, and growth in gross merchandise volume (GMV).
Affirm's profit margins have been negative, as the company has invested heavily in product development, marketing, and acquisitions. Affirm's net loss widened from $-113 million in 2020 to $-707 million in 2022. Affirm's cash from operations (CFFO) also moved from -$71.30 million in 2020 to $-162.194 million in 2022, indicating that the company is spending more cash than it is generating from its core operations.
Affirm's balance sheet is strong, with $2.44 million in cash as of March 2023 and $2.51 million in total equity as of March 2023, but its market value has declined significantly since then due to a drop in its stock price. Total liabilities amounted to $4.99 million as of March 2023, mainly consisting of loans payable and securitization debt related to its lending activities, but it also faces potential obligations from its partnership agreements with merchants and financial institutions.
Affirm valuation metrics are mixed, as the company trades at a high price-to-sales ratio of 3.05 as of June, 6th, 2023, but at a low price-to-book ratio of 1.86 on the same day based on its book value per share, reflecting its high growth prospects and low profitability. Affirm's forward P/E ratio is unavailable, as the company is expected to report a net loss, but its operating margin is improving as it scales its network and leverages its fixed costs.
Based on these metrics, Affirm stock is highly volatile and uncertain, as it faces several risks and opportunities in the BNPL industry. Affirm's valuation may depend on its ability to achieve profitability, reduce losses, expand its network, launch new products, and enter new markets. Investors should consider these factors before making a trading decision.
AFRM Stock Price Performance
The AFRM ticker is for Affirm Holdings Inc. Class A common stock, which is listed on the Nasdaq Global Select Market. Affirm holdings stock is traded in U.S. dollars (USD) and has regular, pre-market, and after-market trading sessions.
AFRM went public on January 13, 2021, at $49 per share, but the Affirm share price has since dropped to $16.51 as of June 6, 2023. The Affirm stock has been affected by factors such as Affirm news, competition, regulation, and market sentiment.
Affirm stock price is influenced by its revenue growth and profitability, competitive position and innovation, partnerships and acquisitions, and regulatory environment and compliance.
AFRM's future prospects depend on its ability to capitalize on the growing demand for BNPL solutions in the e-commerce market. Affirm has several opportunities for growth and expansion, such as leveraging its merchant network, driving repeat use and share of wallet, reducing loss rates and achieving profitability, launching new products, and expanding into new categories and markets. However, Affirm also faces several challenges and risks that could hamper its growth potentials, such as rising competition, default risk and regulation of fees/interest rates, market volatility and investor sentiment, and customer acquisition and retention costs.
Affirm stock forecast
The average 12-month price target for AFRM stock forecast is $20. The high target for Affirm stock prediction is $53 and the low target is $7.
Risks and Opportunities
Potential Risks Facing Affirm Holdings Inc.
Affirm faces several risks that could adversely affect its business, financials, and stock price, such as:
Affirm Competitors
Affirm operates in a highly competitive industry that includes other BNPL providers such as Klarna, Afterpay, and PayPal and traditional payment networks such as Visa and Mastercard. These competitors may offer lower fees, higher approval rates, more attractive terms, or wider merchant coverage than Affirm. For example, PayPal recently launched its own BNPL service called Pay in 4, which charges no interest or fees to consumers or merchants. Affirm's competitive advantage lies in its proprietary technology platform, strong merchant partnerships, and transparent and flexible payment options.
Other Risks
Affirm also faces default risk and regulation of fees/interest rates. Default risk refers to the possibility that consumers may not repay their loans on time or at all, resulting in losses for Affirm. Regulation of fees/interest rates refers to the potential changes in laws or regulations that could limit or cap the fees or interest rates that Affirm can charge to consumers or merchants. These risks could affect Affirm's revenue and profitability.
Opportunities for Growth and Expansion
Affirm has several opportunities for growth and expansion that could enhance its business, financials, and stock price, such as:
Growth Opportunities
Affirm can leverage its partnerships with merchants like Peloton, Walmart, American Airlines, and Shopify to enable installment options at checkout and attract more consumers and merchants to its platform. Affirm can also implement strategies that drive greater repeat use, a higher share of wallet, and improving margins over time. For example, Affirm recently launched a loyalty program called Affirm Rewards, allowing consumers to earn cash back on eligible purchases made with Affirm. Affirm can also reduce its loss rates and achieve profitability in fiscal 2023 by improving its underwriting models and risk management practices.
Future Outlook and Expansion
Affirm can expand into new merchant categories and markets outside the U.S. and Canada by offering its BNPL solution to more online and offline retailers across various sectors, such as travel, health care, education, and home improvement. Affirm can also launch new installment or saving products beyond the 2-4 payment options currently available by leveraging its data and insights on consumer behavior and preferences. For example, Affirm recently launched a new product called Affirm Plus that allows consumers to pay for purchases between $50 and $2,000 over six months with no interest.
How to Invest in AFRM Stock
There are three main ways to invest in AFRM stock: holding the share, buying an option, or trading a CFD.
● Holding the share means buying and owning AFRM stock directly. This way, you can benefit from any dividends or capital appreciation of the stock. However, you must also pay commissions, fees, and taxes on your transactions and holdings. You must also have enough capital to buy the minimum number of shares your broker requires.
● Buying an option means acquiring the right, but not the obligation, to buy or sell AFRM stock at a specified price and date. This way, you can leverage your investment and profit from the stock's price movements without owning it. However, you must also pay your transactions' premiums, commissions, and fees. You also risk losing your entire investment if the option expires worthless.
● Trading a CFD means entering into a contract with a broker to exchange the difference in the price of AFRM stock between the opening and closing of the trade. This way, you can speculate on the stock's price movements without owning it. You can also trade with leverage and short-sell the stock if you expect it to decline. However, you must also pay spreads, commissions, and overnight transaction fees. You also risk losing more than your initial investment if the market moves against you.
Among these three ways, trading a CFD may be the most convenient and cost-effective way to invest in AFRM stock. Here are some reasons why you should trade AFRM Stock CFD with VSTAR:
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Conclusion
Affirm Holdings Inc. is a leading BNPL provider that offers transparent and flexible payment options for e-commerce merchants and shoppers. Affirm has strong revenue growth, a robust technology platform, and a loyal customer base. Affirm also has several opportunities for growth and expansion in the booming BNPL market. However, Affirm also faces several risks and challenges, such as rising competition, default risk and regulation of fees/interest rates, market volatility, and investor sentiment.
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FAQs
1. Is Affirm a hold or sell?
The majority of analysts have a Hold rating on Affirm at current levels.
2. Is Affirm a good stock?
Yes, Affirm has the potential to be a very good stock for long-term investors despite its near-term challenges. It is the clear leader in the high-growth buy now, pay later space.
3. How high will Affirm go?
If Affirm can execute on its growth plans and continue gaining share in the booming buy now, pay later space, its stock could potentially double or more over the next 3-5 years.
4. What is the future of Affirm Holdings?
Affirm still seems well-positioned for long-term growth in the buy now, pay later space as digital payments grow. However, the path to sustainable profitability could be long and the stock volatile until the underlying economics of the industry improve.
