Affirm Holdings (AFRM), the buy-now-pay-later (BNPL) service provider, is currently facing a tumultuous year in 2024, with its stock down 37.8% year-to-date. The company has been grappling with persistent delays in rate cut expectations, contributing to its underperformance.
Despite these challenges, Affirm recently announced a partnership with tech giant Apple (AAPL), which was received positively by investors. The stock surged on June 11 following the news, indicating investor optimism about the collaboration.
However, questions remain about whether this partnership will be sufficient to drive a significant turnaround for Affirm. The company noted in its recent 8-K filing that the Apple partnership is not expected to have a material impact on revenue or gross merchandise volume in fiscal year 2025.
Deciphering Affirm’s Performance
Established in 2012, Affirm offers BNPL services for online and in-store purchases, generating revenue through service fees and interest charges. In fiscal Q3 of 2024, the company surpassed revenue expectations, with notable growth in core network revenue and interest income.
Affirm’s operational metrics, including gross merchandise value, active customers, transactions per active customer, and active merchants, showed improvement year-over-year. The company also reported positive cash flow from operations, albeit with a concerningly high level of debt.
Looking ahead to Q4 2024, Affirm anticipates further growth in GMV and revenue, with analysts projecting robust forward revenue growth compared to the sector median.
Exploring Potential Upside for AFRM Stock
The BNPL market is set for substantial expansion, presenting an opportunity for companies like Affirm. With a projected increase in BNPL sales volumes and consumer adoption, Affirm is poised to benefit from this market growth.
Additionally, potential rate cuts by the Federal Reserve could alleviate pressure on growth-focused lenders, offering a positive macroeconomic outlook for companies like Affirm.
Strategic Initiatives and Expansion Plans
Affirm’s focus on artificial intelligence (AI) technologies, such as its AI assistant for customer support, aligns with broader industry trends. The company’s initiatives like Purchasing Power and Adaptive Checkout aim to enhance user experience and underwriting capabilities.
Furthermore, Affirm’s international expansion plans, particularly in the UK, present a significant growth opportunity, tapping into a sizable addressable market outside its core regions. The company’s existing partnerships in Europe provide a strong foundation for further expansion.
Analyst Sentiment and Recommendations
Analysts offer a mixed outlook on AFRM stock, with a consensus rating of “Hold” and a mean target price indicating potential upside. Various analyst opinions range from “Strong Buy” to “Strong Sell”, reflecting the divergence in views regarding Affirm’s future performance.
In conclusion, the outlook for Affirm remains uncertain, with strategic partnerships, market dynamics, and internal initiatives shaping the company’s path forward. Investors will need to carefully weigh the potential risks and rewards associated with investing in this evolving fintech landscape.