The credit card industry is under attack. Buy Now, Pay Later is proving popular among young spenders, led by companies like Affirm (AFRM -4.95%), who recently wowed Wall Street with stellar earnings for its most recent quarter (ending December 31, 2024). The stock soared over 20% after the company surpassed marketwide revenue estimates and broke even on operating margin.
It's newsworthy anytime a stock jumps 20% in a day, but those following the name know this is simply an extension of Affirm's success. The stock has appreciated a whopping 677% since the start of 2023!
Investors undoubtedly want to know whether Affirm's rally still has legs or if the window of opportunity is about to close. Let's look at whether investors should buy Affirm under $85 today.
Affirm is building a network effect within its business
If you didn't know, buy now, pay later (BNPL) aims to treat each transaction as an individual loan. Technically, consumers are still borrowing money, but it helps prevent people from accumulating large balances with high interest rates, a financial black hole that consumers can get stuck in. Yes, some BNPL loans make consumers pay interest charges, but many offer zero-percent interest. In these cases, Affirm makes money from the fees it charges merchants.
Affirm strives to build a network effect in its business, where the more merchants and spenders use it, the more powerful it becomes.
The most recent quarter (Q2 of Affirm's 2025 fiscal year, but Q4 of the calendar year 2024) showcased continued progress on these fronts:
Source: Affirm Q2 2025 (ending Dec. 31, 2024) earnings supplement.
Having more people using Affirm more frequently resulted in 35% gross merchandise volume (GMV) growth from a year ago and 47% revenue growth. This places Affirm among the fastest-growing companies in the financial technology space.
Affirm has already partnered with blockbuster merchants like Amazon and rolled out its BNPL integration with Apple in September. It has emphasized that it will slowly and carefully roll out its service to Apple Pay's 61 million (or so) U.S. users, signaling that its already-accelerating revenue growth could get another boost over the coming year and beyond.
Is Affirm's BNPL business sustainable? A resounding yes!
For a long time, investors seemed skeptical that BNPL companies could survive, let alone profit.
Yet, Affirm has continually shown that as it grows, the financials improve:
Source: Affirm Q2 2025 supplement.
Affirm offers interest-free financing, but it's not its bread and butter. Zero-interest loans represented just 28% of its total products in Q2 2025. The rest are interest-bearing. Plus, Affirm is building adjacent revenue streams through innovation. One is its Affirm Card, a physical payment card that has ramped up to 1.7 million users and gives Affirm a presence at payment terminals for everyday transactions.
Credit is the core of Affirm's business. Since it sells some of its loans to institutions, the company must maintain trust and build investor appetite for its loans. Otherwise, it wouldn't have the lending capacity to grow. Management spoke to its progress here, mentioning partnerships with debt investors, such as Prudential and Liberty Mutual. The company dramatically increased its lending capacity to $22.6 billion from $15.5 billion a year ago.
Lastly, Affirm boasts a rock-solid balance sheet with $1.8 billion in cash. The company generated over $600 million in free cash flow over the past year. Affirm will always depend on people repaying their loans, but the business is financially healthy with no current red flags.
But is Affirm worth buying before it hits $85 per share?
Of course, the question remains: Should investors buy now or wait for later?
CEO Max Levchin has said he envisions Affirm as the next American Express, a diversified financial company with strong brand power. So, let's compare the two stocks below:
AFRM EV to Revenues data by YCharts
If you compare their enterprise value to revenue, Affirm has continually been more expensive. On the other hand, American Express grew revenue by roughly 10% year over year last quarter. Affirm grew at 46%, a solid argument for a higher valuation.
Given that Affirm's growth is accelerating and the looming potential boost from its Apple Pay integration, investors can afford to pay a more expensive valuation because the business should burn that off with growth over time. If you believe in Affirm's trajectory, the stock remains a solid long-term buy today.
However, Affirm has proven highly volatile, so investors should avoid chasing. Feel free to buy shares, but don't jump in with both feet. Buy the stock slowly over time. The stock could easily pull back after its epic rally, allowing investors to accumulate shares at better prices.
Ultimately, Affirm looks like a long-term winner growth investors may want to own.
