Affirm Holdings
Affirm was one of the best-performing stocks in the post-pandemic period due to low rates and growth in online shopping. Now, these trends have reversed and the environment for growth stocks has deteriorated due to inflation and higher rates. As a result, Affirm's stock is down 76% YTD and off by 87% from its all-time high set in November of last year. Another concern for Affirm and all buy now pay later companies is continued deterioration in the economic outlook which would impact revenues and lead to a higher rate of defaults.
Inside the Numbers
In its fiscal Q4, Affirm reported a loss of $0.64 per share which was wider than analysts' expectations of a $0.58 per share loss. It was also steeper than last year's $0.46 per share loss. Revenue came in at $364 million which was better than analysts' expectations of $355 million and a 39% improvement from last year.
The number of active merchants using Affirm increased to 235,000 from 207,000 in the previous customer, while its total number of customers increased to 14 million from 12.7 million in the previous quarter. Gross merchandise volume reached $4.4 billion, a 77% increase from last year and above expectations of $4.1 billion. This continued growth is one silver lining for Affirm, especially amid a backdrop of weakening online spending compared to the pandemic period.
In its conference call, management also stressed that it sees its buy now pay later service as an 'honest product' unlike other marketplace lending businesses. CEO Max Levchin added that "We're not dealing with the decaying performance of loans made years ago in pursuit of growth at all cost. Roughly half of our outstanding loan book is expected to pay down with four months or so, and about 80% within eight months."
For the next quarter, the company sees gross merchandise volume between $4.2 billion and $4.4 billion and revenue between $345 million and $365 million. Both figures were below analysts' expectations of $4.55 billion in GMV and $386 million in revenue.
