In this video, I will be talking about the very hot buy-now-pay-later stock Affirm (AFRM -6.64%). The recent partnerships with Apple and Amazon and great quarterly earnings have made the stock go up over 80% since its August lows. You can find the video below.
A different BNPL
Affirm enables customers to buy now and pay later but requires them to pay interest. Unlike Afterpay, which Square recently acquired for $30 billion, Affirm does a credit check and offers financing from 0% to 30%. Since it charges interest, it doesn't charge late fees. This means that what you see at checkout is exactly what you're going to be paying.
For merchants, it's a plus to offer these types of services because they may attract more customers and increase total order values. Shoppers may like having another payment option. The BNPL market is still in its early innings, but there are already some big players competing for the same pie. These names include Klarna, PayPal, and Afterpay.
Buy-now-pay-later companies might cause credit card companies some trouble in the future because of their positioning in the buying and selling cycle.
Accelerating growth
Affirm's Q4 revenue grew 71% year over year to $261.8 million, fueled by a 106% rise in gross merchandise volume (GMV), which totaled $2.5 billion. Active merchants soared 412% to nearly 29,000, driven by Affirm's partnership with Shopify.
Meanwhile, active consumers grew 97% to 7.1 million. People are also using Affirm's services more often, with transactions per active consumer rising 8%, to roughly 2.3. Management expects Affirm's revenue to grow by roughly 35% to approximately $1.17 billion in fiscal 2022, fueled by a 52% increase in GMV, to $12.6 billion. These estimates do not include the potential GMV increase from the recent Amazon partnership.
Full full insights do watch the video below.
*Stock prices used were the closing prices of Sept. 10, 2021. The video was published on Sept. 14, 2021.
