AFRM

What is Affirm Holdings and what does it do? 

Australia has Afterpay or Zip. Klarna hails from Sweden. Affirm is America's main contestant in the Buy Now, Pay Later (BNPL) game.

Founded in 2012 by former PayPal co-founder, Max Levchin, Affirm Holdings operates a platform for digital and mobile-first commerce in the United States and Canada. Its BNPL app allows consumers to buy goods and pay them off over varying lengths of time depending on the size of the purchase. Affirm proudly forgoes late fees on loans, and some merchant partners have interest rates as low as 0%.

One of Affirm’s competitive advantages is its algorithm, which is able to assess loan risk quickly and accurately by using over “one billion data points, including data from over 30 million loans and over seven years of repayments.”

The company also integrates merchant partners into its platform, including small businesses, large enterprises, direct-to-consumer brands and brick-and-mortar stores from a wide range of industries. 

Affirm has stated the growth of their merchant partner network is key to the company’s future success.

How does Affirm make money?

Affirm earns its revenue from two sources: consumers and merchants. The company reports revenue in one business segment.

The first source of revenue is interest charged to consumers. Affirm originates loans through its own platform, Affirm Loan Services, or purchases them from originating bank partners including Cross River Bank and Celtic Bank.

The second source is the processing fees charged to merchants when sales are made. The size of the processing fee is dependent on the arrangement between Affirm and each merchant.

As of June 2021, Affirm had 7.1 million active consumers and over 102,000 merchant partners including Michaels, Walmart (WMT), Target (TGT), Neiman Marcus, Williams Sonoma (WSM), Shopify (SHOP), Amazon (AMZN) and Peloton (PTON).

Does Affirm make a profit?

No, Affirm is currently unprofitable.

The company’s net income sank deeper into the red at negative US$120m, US$113m and US$431m during FY2019, FY2020 and FY2021, respectively.

In June 2021, Affirm reported a net deficit of US$447.2m.

Is AFRM stock a buy or sell? 

Affirm went public on 13 January 2021 at US$49 a share. The AFRM stock price almost doubled on the same day, eventually closing at US$97.24 per share. The stock remained strong for most of 2021, eventually climbing to an all-time high of US$175.65 in November 2021. However, rising inflation concerns, fears of a COVID-19 resurgence and geopolitical tensions saw AFRM share price drop 70% to an all-time low of US$26.02 in March 2022.

Despite strong revenue growth, investors have been concerned about the business’ losses. Operating expenses have been through the roof while net income sinks deeper.

However, some investors are still positive about Affirm’s future. Affirm’s most recent annual report showed active consumers had increased from 3.5 to 7.1 million between 30 June 2020 to 30 June 2021. A year-on-year increase of 97%.

Who owns AFRM stock?

As of March 2022, Affirm’s five largest shareholders are Jasmine Ventures (8.03%), Shopify (7.14%), Capital Research and Management Company (6.89%), Affirm CEO Max Levchin (5.93%) and Baillie Gifford & Co. (5.74%)