The stock market was having a so-so day on Monday, with the Dow Jones Industrial Average slightly higher and the S&P 500 and Nasdaq Composite indexes lower by less than 1% as of 2:15 p.m. EDT. However, buy now, pay later company Affirm (AFRM 1.46%) was a big underperformer, with shares down by 11%.
There isn't any company-specific news fueling today's decline. In fact, the only major news item specific to Affirm is an analyst increasing its price target. However, there is a potential explanation of why we may be seeing shares pull back.
Affirm has been one of the market's best-performing stocks recently. A couple of weeks ago, Affirm jumped more than 40% in a day when it announced a partnership with Amazon, and the stock soared again last week after better-than-expected earnings from the fintech company. In fact, even after today's decline, Affirm is still 63% higher than it was a month ago. So, we could just be seeing a slight cooling off after such a rapid upside move.
While there isn't any major news today, it's worth noting that there has been some concerning data to emerge about the BNPL space as a whole. One study released last week found that one-third of U.S. consumers who used a BNPL service had fallen behind on at least one payment. A separate study found that about 10% of BNPL consumers in the U.K. were facing collection activity.
To be clear, BNPL continues to be a red-hot growth industry for now and there's nothing in Affirm's latest earnings results to indicate that any consumer activity is a problem for the business. But these trends are certainly worth monitoring as the industry grows.
As far as today's move goes, there doesn't seem to be any driving force behind it other than a pullback after a rally, so if you believe in the BNPL space, and Affirm in particular, over the long run, it could be a second-chance buying opportunity.