What happened
Affirm Holdings (AFRM +6.36%) finished the day down 3.8% on Friday, closing at $19.28 per share. The stock price had dropped as much as 6.3% at around 2:54 p.m. ET
The market was down big on Friday, with the Dow Jones Industrial Average falling 486 points (1.6%), the Nasdaq falling 199 points (1.8%), and the S&P 500 down 65 points (1.7%).
So what
For banks and fintechs, especially those in the payments industry, the decline is probably due to a hangover effect from the Federal Reserve's 75-basis-point interest-rate increase on Wednesday. Rates have now increased 75 basis points each of the past three times the Fed has convened. The benchmark rate is now 3% to 3.25% -- the highest since 2008.
NASDAQ: AFRM
Key Data Points
Affirm is a "buy now, pay later" company, which offers installment loans to consumers at the point of sale. Rising interest rates are the tool the Fed is using to slow down the economy and combat high inflation. As the needle has barely budged, the Fed is expected to continue raising rates through the end of 2022 into 2023.
Many investors fear it could lead to a recessionary environment or low growth in gross domestic product, which would hurt banks and payment providers. Affirm wasn't the only financial stock to sink lower on Friday, as Mastercard, Citigroup, and Goldman Sachs were all down.
Now what
The bad interest-rate news was offset by some good news elsewhere for the fintech, although it didn't seem to be good enough to push the stock price forward today.
On Thursday, analysts at Mizuho came out with a research note citing promising trends for Affirm's 30-day delinquencies, which looked to be declining in August. And while 60- and 90-day delinquencies continued to rise last month, the increases appeared to be at a lower rate. Consistently rising delinquencies have been a key concern. Mizuho maintained a buy rating and a $42 price target, reported The Fly. This will be an interesting metric to watch, particularly in a slowing economy.
Another positive for Affirm this week was the news that it expanded its relationship with Amazon (AMZN 1.15%), extending its service to Amazon's Canadian customers.
However, despite these developments, there is still too much uncertainty with the economy, and Affirm's profitability, to warrant a buy right now.
