It's the holiday season, and investors are out shopping for deals, including the hottest stocks. Affirm (AFRM +4.06%) isn't one of them. Its share price has declined by 24% over the past three months. It's easy to forget that the stock for this buy now, pay later company has skyrocketed roughly 365% over the past three years.
Given the price drop in recent months, is Affirm's stock yesterday's news at this point?
NASDAQ: AFRM
Key Data Points
Affirm continues to stand out in the buy now, pay later industry
Purchasing using buy now, pay later continues to gain usage among younger consumers, according to research by The Motley Fool. Affirm competes with a variety of other lenders and fintech companies, but it continues to stand out. Unlike most, the company doesn't charge hidden or late fees, a common complaint of those who use buy now, pay later services.
Additionally, Affirm has partnered with multiple leading brands and e-commerce companies, including Amazon, Apple, and Shopify. As a result, the company continues to generate outstanding business results despite low consumer sentiment, and concerns that its target market, Gen Z and millennials, are struggling financially in this economy.
Image source: Getty Images.
Affirm's gross merchandise volume, the value of transactions processed across its platform, was $10.8 billion in the first quarter of its fiscal year 2026 (ended Sept. 30, 2025), a 42% year-over-year increase. To Affirm's credit, delinquency rates have remained stable, hovering near 2024 and 2025 levels to begin the fiscal year.
The business is now making money
Affirm's business development reached a point where it began generating free cash flow two years ago, including $769 million over the past four quarters, an impressive 22% of its revenue. More importantly, Affirm earned just under $81 million in net income this past quarter.
Net income is significant because it includes noncash expenses, such as stock-based compensation. A business can sound like a great idea or tell a good story, but a company only sticks around if it generates a profit.
Affirm faces default risks to its business, just like any credit card company or lender. However, as its business model becomes increasingly profitable, it sends a clear message that Affirm's take on buy now, pay later is not only popular, but it is also building its case as a sustainable business.
Clearly, Affirm is not yesterday's news
But should investors buy the stock now?
Beyond the economic risks, the buy now, pay later space is likely to remain quite competitive, so Affirm must continue to execute at a high level. Affirm and Amazon recently extended their partnership for five more years. The e-commerce leader's size and scale have helped Affirm grow, but it could cause problems if Amazon comes to represent the majority of Affirm's business.
Affirm's stock has also become more expensive over the past three years; its enterprise-value-to-revenue ratio, currently 8.1, has more than doubled.
All in all, Affirm remains highly relevant, but it's probably not a stock for the faint of heart. If you do invest, the wise move would be to dollar-cost average, with plans to hold the stock for the long term as part of a diversified portfolio. That gives you exposure to the upside if Affirm continues to succeed, while minimizing your losses if it doesn't.
