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Here's Why Affirm Holdings Was Up Big Today

By Keith Noonan – Aug 2, 2021 at 5:51PM

Key Points

  • Square's acquisition of Afterpay has the market thinking Affirm Holdings could be the next big fintech buyout target.

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Despite the recent pop, the fintech stock is still down roughly 33% year to date.

What happened

Shares of Affirm Holdings (NASDAQ:AFRM) jumped 14.8% in today's trading session, according to data from S&P Global Market Intelligence. The fintech stock gained ground following news that Square (NYSE:SQ) would be acquiring Afterpay (OTC:AFTP.F) in an all-stock deal valued at approximately $29 billion. 

AFRM Chart

AFRM data by YCharts

Square published a press release on Aug. 1 announcing that it would be acquiring Afterpay, a competitor in the buy-now, pay-later category that Affirm Holdings operates in. It looks like demand for the service category is heating up, and investors poured into Affirm Holdings stock in response to the big buyout news. 

Two hands putting red puzzle pieces together.

Image source: Getty Images.

So what

Square's acquisition of Afterpay is expected to close in the first quarter of 2022. This fintech power player's acquisition of the Australia-based buy-now, pay-later specialist could result in a tougher competitive landscape. However, the market mostly appears to be reading the move as an affirmation of Affirm Holdings' positioning for growth and the untapped value in the broader service category. Square stock also closed the day up roughly 10.7%.

Now what

Square's acquisition of Afterpay boosts Affirm Holdings' visibility as a potential buyout target, though the company doesn't necessarily need to look for large-scale merger opportunities in order to remain competitive. Mobile-focused payment and financing services have seen huge growth over the last decade, but the market for these services still has big room for growth in the U.S. and other regions, and it should be able to support a breadth of winners across a variety of service categories. 

Affirm Holdings now has a market capitalization of roughly $17.1 billion and is valued at approximately 15 times this year's expected sales. 

Keith Noonan has no positions in any stocks mentioned. The Motley Fool owns shares of and recommends Square, AFTERPAY T FPO, Affirm Holdings, Inc. The Motley Fool has a disclosure policy.

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Affirm Holdings, Inc. Stock Quote
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