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Why Affirm Stock Surged Today

By Joe Tenebruso – Nov 11, 2021 at 6:47PM

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A blockbuster deal should fuel the installment payment leader's growth.

What happened

Shares of Affirm Holdings (AFRM 1.18%) jumped 13.7% on Thursday after the financial services company saw its revenue boosted by its partnerships with e-commerce titans Shopify (SHOP) and Amazon.com (AMZN -0.07%).

So what

Affirm's revenue leaped 55% year over year to $269.4 million in its fiscal 2022 first quarter. That bested Wall Street's projections, which had called for revenue of $248.2 million. 

The number of merchants active on Affirm's platform skyrocketed to 102,000, up from 6,500 in the year-ago quarter. Soaring usage of installment payment services among Shopify's over 1.7 million online business customers is helping to turbocharge Affirm's expansion.

Better still, active consumers on Affirm's network soared 124% to 8.7 million. "Our strong quarter once again demonstrates the continued momentum across Affirm as more people embrace the transparency, flexibility, and value our solutions provide," CEO Max Levchin said in a press release.

A rising bar chart.

Affirm is expanding its business at a torrid clip. Image source: Getty Images.

Together, the rising adoption of Affirm's "buy now, pay later" services among merchants and shoppers drove an 84% increase in gross merchandise volume (GMV) -- essentially, the total amount of payments processed on its platform -- to $2.7 billion.

Still, Affirm's growth investments are weighing on its profitability. The company delivered an operating loss of $166.1 million in the third quarter, compared to a loss of $33.3 million in the prior-year period.

"As we continue to capitalize on our hyper-growth phase, we are strongly positioning ourselves for the long-term by investing in our key competitive advantages in technology and talent," CFO Michael Linford said.

Now what

The biggest news of the day was Affirm's announcement that it expanded its partnership with Amazon. The e-commerce giant's customers will be able to use Affirm's installment payment services on purchases of at least $50.

Notably, Affirm will serve as Amazon's exclusive provider of buy now, pay later options in the U.S. until January 2023. Amazon is also obtaining warrants that will allow it to purchase an equity stake in Affirm as part of the deal, which will give the online retail juggernaut a vested interest in the pay-over-time leader's long-term success.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso has the following options: long January 2023 $2,400 calls on Amazon. The Motley Fool owns shares of and recommends Affirm Holdings, Inc. and Amazon. 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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