Affirm Holdings (AFRM -7.19%) bounced back in March, gaining 10.6% for the month, according to S&P Global Market Intelligence. Affirm outperformed the S&P 500, which was up 3.6% in March, but remains in the red for the year. Currently, the stock is trading at about $47 per share, down 53% year to date (YTD).
Affirm Holdings is a buy now, pay later (BNPL) company. It allows consumers to pay for their goods in installments, whether online or in person. This is an alternative to using credit cards. Using AI, the Affirm app instantly assesses your credit at the point of sale and then calculates your installment payments on the spot. Often no interest is added to the price, but in cases where interest is applied, it is determined upfront and put into the installment payments. Affirm is not a bank, so it relies on banking partners for the loans. Most of the income comes from fees paid by merchants each time it is used.
The fintech went public in January of last year and took off like a rocket, hitting almost $170 per share in November. It has since come crashing down some 72% -- including 52% YTD. It had been way overpriced and got caught up in the massive sell-off that began in November.
While revenue and user growth has been rapid, concerns about inflation, the economy, and BNPL users in general falling behind on their payments have emerged. As Affirm doesn't charge late fees, that could be a concern. In its fiscal second quarter (ended Dec. 31), Affirm boosted its provision for credit losses to $52 million from $12 million a year ago. Also, high expenses have offset revenue numbers, and Affirm's net loss grew to $159 million in the quarter, up from $28 million a year ago.
Affirm plummeted to a low of $26 per share on March 14 but has since bounced back to its current $47 per share.
The bounce can be directly tied to a business update the company released on March 14, where it provided a fiscal-third-quarter and full-year outlook. Gross merchandise volume and revenue projections were updated to the high end of the range previously set just a month ago, while revenue less transaction costs was projected to be higher for the quarter and full year.
Also, operating expenses are expected to be lower than previously thought, making the adjusted operating loss for the quarter and full year lower than expected. If this pans out, it will be a good sign that Affirm is heading in the right direction, but there is a lot of uncertainty in the markets and economy and there are many competitors in the space. Tread cautiously.