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Yellow Flags That Investors in Affirm Should Keep an Eye on After Strong Earnings

By Jose Najarro – Updated Sep 13, 2021 at 7:51AM

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Affirm's stock price jumped over 20% after the company reported strong guidance.

Today's video focuses on Affirm's (AFRM -7.11%) recent earnings, which were announced on Sept. 9 after the market closed. Investors were very bullish after the report as the stock price jumped over 20%. I review the earnings data in the video, but more importantly, I mention a few yellow flags investors should know. Yellow flags are not a reason to sell but just things to consider as an investor. Here are some highlights from the video. 

  1. Affirm reported solid year-over-year revenue growth, but the most significant bullish case for investors is the guidance for the fiscal year 2022. Affirm guides for revenue of $1.16 billion to $1.19 billion, in line with analysts' expectations. Still, more importantly, the guidance does not consider revenue from its recent partnership with Amazon, which has investors excited about more substantial growth in the upcoming quarters. 
  2. The first yellow flag is that Affirm has numerous competitors. A prime example would be PayPal and its recent acquisition of a Japanese buy now, pay later company, which expands its market in Asia. Investors may argue that Affirm, with its recent partnership with Shopify and Amazon, has shown to be a strong business. 
  3. The second yellow flag is current valuations. In the video, I take a closer look at Affirm's forward price-to-sales valuations. The valuation seems to be a bit high, but the market can continue to seem high for high-growth stocks like Affirm. 

Click the video below for my full thoughts and analysis. 

*Stock prices used were the pre-market prices of Sept. 9, 2021. The video was published on Sept. 9, 2021.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jose Najarro owns shares of PayPal Holdings and Shopify. The Motley Fool owns shares of and recommends Affirm Holdings, Inc., Amazon, PayPal Holdings, and Shopify. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy. Jose is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Stocks Mentioned

Affirm Stock Quote
$13.58 (-7.11%) $-1.04 Stock Quote
$92.70 (-1.52%) $-1.43
PayPal Stock Quote
$73.82 (-1.12%) $0.84
Shopify Stock Quote
$42.26 (-1.87%) $0.81

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

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