What happened
Affirm Holdings (AFRM +0.20%) stock was tanking on Thursday morning, down as much as 6.3% at around 10:15 a.m. ET. By 12:40 p.m. ET it had crawled back a little but was still down 4.3%, trading at $22.42.
It was yet another down day on Thursday, on its way to being the fifth straight negative day on the three major indexes.
So what
Affirm, a buy now, pay later provider, is no doubt feeling the effects of the overall market malaise, sparked last Friday by Federal Reserve Board Chair Jerome Powell's speech at Jackson Hole, Wyoming, where he gave no indication that the Fed would let up on its aggressive push to raise interest rates to slow down inflation. This sparked recession fears, which would not be great for a company like Affirm that relies on consumer spending to generate revenue.
NASDAQ: AFRM
Key Data Points
Analysts seem to agree, as a slew of Wall Street banks lowered their price targets for Affirm after the company released its fiscal fourth-quarter earnings on Aug. 25. Gross merchandise volume (GMV) was up 77% in the quarter year over year, and revenue was up 39% to $364 million, but the company missed earnings estimates with a net loss of $0.65 per share.
The bigger concern, however, was its outlook for the first quarter of its fiscal year 2023, which called for revenue of $345 million to $365 million. That would be even with or lower than this past quarter. For the full fiscal year 2023 it called for revenue of $1.625 billion to $1.725 billion, up from 2022's $1.3 billion.
Now what
Truist and DA Davidson lowered their price targets for Affirm but maintained their buy ratings. Truist analyst Andrew Jeffrey called Affirm's guidance conservative and said the downside was limited. However, John Hecht at Jefferies had a more bearish take, citing higher operating expenses and a challenging macroeconomic environment.
On Aug. 30, Bank of America lowered its price target for Affirm from $45 to $38 as analyst Jason Kupferberg said he expects GMV growth to slow more in fiscal 2023 than he initially thought, reported The Fly.
A potential economic slowdown, coupled with rising loan delinquencies, as my colleague James Brumley pointed out, could certainly create continued challenges for Affirm in the near term.
