What happened

Shares of the buy now, pay later (BNPL) company Affirm (AFRM 5.17%) traded roughly 16.6% lower as of 10:22 a.m. ET today after the company reported earnings results for the fourth fiscal quarter of 2022 that disappointed the market.

So what

Affirm reported a net loss of $0.65 on total revenue of $361.4 million for the quarter ending June 30. Earnings missed consensus, while revenue beat. 

Gross merchandise volume (GMV), which is the total dollar amount of volume that goes through Affirm's platform, came in at $4.4 billion in the quarter, which is up from $3.9 billion in the prior quarter and up from $2.5 billion year over year. For the full fiscal year, GMV came in at $15.8 billion, up almost 87% from fiscal year 2021.

"While the growth of online commerce is falling back to pre-COVID levels, the secular trend toward adopting honest financial products is gaining momentum," Affirm's Founder and CEO Max Levchin said in a statement.

Levchin added, "We remain focused on scaling our network, maintaining attractive unit economics, capturing greater share, and helping our partners grow."

Investors, however, are worried about Affirm's guidance. For the next quarter, the fintech company expects GMV of between $4.2 billion and $4.4 billion and revenue between $345 million and $365 million, which essentially provides no growth from this recent quarter.

Now what

The quarterly results weren't bad and Affirm grew GMV solidly. But I still have concerns that eventually there will be more delinquencies among its BNPL borrowers, as the Federal Reserve's interest rate hikes still have not fully seeped their way into the economy.

If delinquencies and loan losses do rise, investors may be less likely to fund loan growth, although management didn't seem to have any near-term funding concerns on the company's earnings call.

Additionally, Affirm's guidance for the next quarter and the full fiscal year 2023 suggests an acceleration after the next quarter. But if the economy enters a more severe recession that may not be the case. Due to these factors, I am still avoiding the stock.