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. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.