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Why Affirm Stock Was Skyrocketing Today

By Jeremy Bowman – Aug 30, 2021 at 11:10AM

Key Points

  • Affirm will be offering its financing services on Amazon.
  • The partnership is currently being tested with a select group of customers and is expected to expand nationally in the coming months.
  • Amazon is now the biggest retail platform outside of China, making the deal a big win for Affirm.

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You could call it the Amazon effect.

What happened

Shares of Affirm (AFRM 8.66%) were rocketing higher today after the buy now, pay later specialist said after hours on Friday that its services would soon be available to Amazon (AMZN 4.46%) customers.

As of 10:26 a.m. EDT, Affirm stock was up 40.2%.

The Amazon and Affirm logos with an Amazon box against a yellow background

Image source: Affirm.

So what

In a press release Friday, Affirm said Amazon is testing its offering with a select group of customers, and plans to expand it more broadly over the coming months to all Amazon U.S. customers. Currently, Affirm's buy now, pay later offering is being made available on purchases of $50 or more.

It's not surprising that Affirm's stock would soar on the news as the partnership represents a big win for the fintech company. Amazon is now the biggest retail platform in the world outside of China, recently surpassing Walmart, as consumers spent more than $610 billion on Amazon over the last four quarters, making it the most valuable merchant partner Affirm could potentially get.

Additionally, Amazon's status as an online retailer makes it more valuable to Affirm than a brick-and-mortar retailer as its payment plan is automatically advertised at checkout. The partnership should not only drive increased adoption for Affirm, but also counts as a victory over rival buy now, pay later services like Klarna and Afterpay, which was recently acquired by Square.

Now what

Affirm stock has been highly volatile since it debuted earlier this year. Buy now, pay later is a relatively new sector in the payments industry and it's unclear if the offering can disrupt the credit card industry or if Affirm has a sustainable competitive advantage.

The Amazon partnership certainly adds credibility to the Affirm bull thesis as it will accelerate both its adoption and brand awareness. Still, the stock is likely to remain volatile as Affirm is still significantly unprofitable and as potential acquisition rumors are swirling following Square's $29 billion takeover of Afterpay.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Amazon and Square. The Motley Fool owns shares of and recommends AFTERPAY T FPO, Affirm Holdings, Inc., Amazon, and Square. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Affirm Stock Quote
Affirm
AFRM
$13.92 (8.66%) $1.11
Amazon.com Stock Quote
Amazon.com
AMZN
$96.54 (4.46%) $4.12
Walmart Stock Quote
Walmart
WMT
$152.42 (-0.36%) $0.55
Block Stock Quote
Block
SQ
$67.77 (9.11%) $5.66
Afterpay Limited Stock Quote
Afterpay Limited
AFTP.F

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

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