Affirm Shares Soar 32% on Strong Earnings Beat, Buoyed by Potential Rate Cuts and Apple Pay Partnership
Affirm, a leading provider of buy now, pay later (BNPL) loans, experienced a significant surge in its stock price after exceeding analysts’ expectations in its fourth-quarter earnings report. The company’s shares climbed nearly 32%, achieving their best day in almost three years, driven by robust revenue growth, narrowing losses, and a positive outlook fueled by potential rate cuts and a strategic partnership with Apple Pay.
Key Takeaways:
- Strong Q4 Earnings: Affirm’s revenue surged 48% year-over-year to $659 million, exceeding analyst estimates, while its net loss narrowed to $45.1 million from $206 million in the same period last year.
- Profitability Target: Affirm has set a goal of achieving operating profitability on a GAAP basis by the fiscal fourth quarter of 2025.
- Rate Cut Tailwind: Potential Federal Reserve rate cuts could benefit Affirm by lowering its funding costs and boosting its loan sales.
- Apple Pay Partnership: A new partnership with Apple Pay is expected to add $12 billion to Affirm’s total addressable market once it launches later this year.
- Continued Growth: Despite a challenging macroeconomic environment, Affirm has shown resilience with a 47% stock price increase in August alone.
A Killer Quarter for Affirm
Affirm’s strong fourth-quarter earnings report has been met with enthusiasm from analysts, who have praised the company’s performance and optimistic outlook. Mizuho analysts, in particular, referred to it as a "killer quarter," highlighting the significance of Affirm’s projected GAAP operating income positivity as a major milestone.
This positive sentiment is further bolstered by the potential for Federal Reserve interest rate cuts, which are widely anticipated. Bank of America analysts believe that lower rates would be beneficial to Affirm’s funding costs and increase gain on loan sales. The company raised its merchant loan APR cap to 36%, up from 30%, a move that analysts believe will further boost its yield and Gross Merchandise Value (GMV) growth.
Apple Pay Partnership Adds Momentum
The potential of Affirm’s upcoming Apple Pay partnership is another significant driver of its recent positive stock performance. Analysts project that this strategic alliance could add a substantial $12 billion to Affirm’s total addressable market, bolstering its growth prospects. The partnership is expected to launch later this year, presenting a key opportunity for Affirm to expand its reach and tap into Apple’s extensive user base.
Navigating a Challenging Landscape
Despite the recent surge, Affirm’s stock remains down about 15% for the year, highlighting the challenges faced by the BNPL sector amidst rising interest rates and a cooling consumer spending environment. However, the company’s strong performance in recent months, particularly in August, suggests a potential shift in sentiment and growing confidence in its future prospects.
Looking Ahead: Growth and Innovation
Affirm is strategically positioned for continued growth, leveraging its robust platform, expanding merchant partnerships, and developing innovative products and services. The company also plans to further capitalize on its established partnerships with major players like Amazon and Peloton, aiming to expand its reach across a wider range of industries and consumer demographics.
In conclusion, Affirm’s recent success is driven by a combination of strong fundamentals, a positive industry outlook, and strategic partnerships. The company’s potential for profitability, combined with the upcoming Apple Pay launch and the prospect of lower interest rates, presents a compelling growth narrative for Affirm in the coming quarters.
