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Why Shares of Affirm Holdings Were Down Over 16% in July

By Nicholas Rossolillo – Updated Aug 2, 2021 at 6:21PM

Key Points

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But shares promptly regained that lost ground on Monday after Square announced the purchase of Affirm peer Afterpay.

What happened

Wild fluctuations in the share price of fintech company Affirm Holdings (NASDAQ:AFRM) continue. After skyrocketing in value following its IPO in January, Affirm has been trending downwards, and a widespread tech growth-stock sell-off in the spring didn't help. Shares were down 16.4% during the month of July, valuing the buy-now, pay-later company at a market cap of just over $17 billion at the end of the month.  

Someone in a store using a tablet while sitting at a table.

Image source: Getty Images.

So what

Affirm had started to make up some ground in June after it announced a partnership with e-commerce software giant Shopify (NYSE:SHOP). Specifically, Affirm will be powering the Shop Pay Installments service, giving potentially many tens of thousands of merchants the ability to offer flexible payment terms to consumers and capitalizing on the fast-growing, buy-now, pay-later (BNPL) movement.  

But Affirm isn't alone in this nascent industry. PayPal Holdings (NASDAQ:PYPL) has a similar product, and fellow BNPL upstarts Klarna and Afterpay are also making waves. Though it's growing fast, Affirm still operates at a loss, so it's no surprise shares took another leg down in July in volatile trading action.

However, the stock came roaring back on the first trading day of August after Square (NYSE:SQ) announced on Aug. 1 it's acquiring Affirm's peer Afterpay (OTC:AFTP.F) for $29 billion. Affirm nearly made up all the ground it lost in July following Square's announcement.

Now what

Speculation is swirling that Affirm could become an acquisition target as well. Digital payment and financial service technologists are quickly adding new capabilities to their suite of services to attract new users, and Affirm's torrid pace of growth (83% year-over-year increase in gross merchandise volume to $2.3 billion, in the first quarter of 2021) would be a valuable asset to the right firm. 

For now, though, Affirm is still independent and finding lots of new partnerships to unlock its full potential. Whether it becomes a takeover target, this is a top name in fintech to keep an eye on. Affirm will announce results on Sept. 9, in the fourth quarter of fiscal 2021.

Nicholas Rossolillo and his clients own shares of PayPal Holdings, Shopify, and Square. The Motley Fool owns shares of and recommends Square, AFTERPAY T FPO, Affirm Holdings, Inc., Shopify, and PayPal Holdings. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify, long January 2022 $75 calls on PayPal Holdings, and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

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