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Why Affirm Stock Tanked on Tuesday

By Evan Niu, CFA - May 11, 2021 at 1:30PM

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The freshly public fintech specialist reported its fiscal third-quarter results.

What happened

Shares of Affirm (AFRM 0.52%) tanked as much as 18% on Tuesday morning after the company reported fiscal third-quarter earnings. The results were mixed compared to Wall Street's expectations, as Affirm recognized significant stock-based compensation expenses in connection with its IPO earlier this year. As of 12:10 p.m. EDT, shares had somewhat recovered and were down 7%.

So what

Revenue in the fiscal third quarter was $230.7 million, easily topping the $198.2 million in sales that analysts were looking for. That resulted in a net loss per share of $1.06, which was worse than the $0.31 per share in red ink that Wall Street was modeling for. The buy-now-pay-later (BNPL) specialist reported gross merchandise volume (GMV) of $2.3 billion. Active merchants more than doubled to 12,000, and active consumers jumped 60% to 5.4 million.

A laptop displaying a merchant website that integrates Affirm next to a pair of glasses and a vase holding flowers

Image source: Affirm.

"Affirm's strong third quarter results reflect continued progress toward building the most valuable and transparent financial network for consumers and merchants," CEO Max Levchin said in a statement. "During the period, we more than doubled the number of merchants on our platform, accelerated GMV growth to 83%, and increased active consumers by 60% year-over-year."

Now what

Affirm said that it is seeing GMV growth accelerate in certain key categories, such as travel and ticketing, due to pent-up demand. The company is also expanding its partnership with Shopify and recently closed its acquisition of Returnly.

Guidance for the fiscal fourth quarter calls for GMV of $2.2 billion to $2.25 billion, with revenue forecast in the range of $215 million to $225 million. That outlook includes expected impacts from Peloton's voluntary recall of its Tread and Tread+ (Peloton is one of Affirm's prominent partners).

Evan Niu, CFA owns shares of Peloton Interactive and Shopify. The Motley Fool owns shares of and recommends Peloton Interactive and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Affirm Holdings, Inc. Stock Quote
Affirm Holdings, Inc.
AFRM
$36.97 (0.52%) $0.19
Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$40.42 (-0.47%) $0.19
Peloton Interactive, Inc. Stock Quote
Peloton Interactive, Inc.
PTON
$11.91 (-0.08%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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