Affirm Holdings (AFRM), the buy-now-pay-later (BNPL) service provider, has been facing a tough battle in 2024, with its stock down 37.8% on a year-to-date basis. The company’s struggle has been exacerbated by persistent delays in rate cut expectations.
Last week, investors received a glimmer of hope as Affirm announced a partnership with tech giant Apple (AAPL). This news led to a significant surge in AFRM stock on June 11, recording a daily gain of 11%.
However, despite the positive sentiment around the Apple partnership, Affirm stated in its 8-K filing that the collaboration would not have a material impact on revenue or gross merchandise volume in fiscal year 2025. The initial excitement seems to have tempered since then.
Challenges Faced by Affirm
Established in 2012, Affirm offers BNPL services for online and in-store purchases. The company generates revenue through service fees from merchants and interest charges from consumers opting for financing. Affirm currently boasts a market cap of $9.55 billion.
In the fiscal Q3 of 2024, Affirm exceeded market expectations with net revenues of $576.16 million, a 51.2% increase from the previous year. Core network revenue and interest income both witnessed substantial growth. Quarterly losses narrowed to $0.43 per share.
Operational metrics saw improvements, including gross merchandise value (GMV) at $6.3 billion, active customers at 18.1 million, transactions per active customer at 4.6 million, and active merchants at 292,300. Affirm reported positive cash flow from operations, though its $6.41 billion debt level raises concerns.
Potential Growth Drivers for AFRM Stock
The BNPL market is poised for healthy expansion, projected to grow from $109 billion in 2024 to $171.6 billion by 2024, with Affirm well-positioned to capitalize on this growth.
Future rate cuts by the Federal Reserve could provide a boost to Affirm, alleviating pressure due to high interest rates. Signals of the Fed’s upcoming policy pivot may ease macro-level uncertainties affecting the stock.
Strategic Initiatives and Expansion Plans
Affirm is leveraging artificial intelligence with its AI assistant and innovative features like Purchasing Power and Adaptive Checkout to enhance user experience. International expansion, starting with the UK, presents a significant growth opportunity for the company.
Analysts’ View on AFRM Stock
Analysts hold a mixed stance on AFRM stock, with a consensus rating of “Hold” and a mean target price of $36.07. This reflects an upside potential of around 18.1% from current levels. The split opinions suggest varying risk tolerances among investors, with potential volatility ahead.
