Delinquencies and loan defaults, in my opinion, will worsen if the U.S. economy enters a recession. Description. Meanwhile, the larger Afterpay and Klarna improved their share from 17% and 2% to 26% and 34% respectively, per Figure 2. WRS Performance Open Drawer. Market volatility and losses have led to a declining stock price. Sign up for a free trial to view exact valuation . If I assume Affirm maintains a revenue per GMV rate of just over 10% (equal to fiscal 2021), then this scenario implies Affirms GMV in fiscal 2029 is $194 billion, which is nearly 4x Klarnas fiscal 2021 GMV. Confidence in subprime mortgage backed securities eroded as did Wall Streets willingness to keep funding the financial institutions that levered up to buy the securities. Core Earnings[1]fell from -$142 million in fiscal 2019 to -$362 million in fiscal 2021. Separately, AFRM has to either bear higher funding costs which will hurt its profitability or pass on such costs that could lead to slower growth, when interest rates rise. Next, we'll discuss its profitability profile. If I assume a similar ratio in an acquisition of Affirm, the firm would be worth ~$11 billion, or 65% below its current market cap. SAN FRANCISCO -- (BUSINESS WIRE)--Aug. 25, 2022-- Affirm Holdings, Inc. (NASDAQ: AFRM) ("Affirm" or the "Company"), the payment network that empowers consumers and helps merchants drive growth, today reported financial results for its fourth quarter and fiscal year ended June 30, 2022 . Affirm is funded by 27 investors. In each scenario, I use 38% revenue growth in year one and 35% in year two, which equal consensus estimates. To date, Affirm has burned $2.5 billion and is on track to burn a lot more cash before it breaks even, if it ever breaks even. One analyst is unabashedly bullish on Affirm due to its remarkable growth trajectory, according D.A. Given the relatively undifferentiated nature of BNPL offerings, any BNPL firms that do achieve profitably will likely be undercut by firms willing to charge lower fees to merchants to acquire customers and take market share. For example, according to Bloomberg, Affirm securitizes only 30% of its loans. . Should You Buy Or Avoid Alaska Air Stock At $52? Affirm is a technology platform that allows users to utilize credit facilities for a number of purchases. buying earnings power at a discount in great companies like "Magic Formula" stocks, high-quality businesses, hidden champions and wide moat compounders). Heres a list of some of the newer BNPL-focused firms: Traditional Firms Stand in Way of Profits for BNPL-Only Firms. AFRM - Affirm Holdings, Inc. - Yahoo Finance Its share price correction in 2022 year-to-date is justified by higher-than-expected costs for Q2 FY 2022, regulatory concerns and rising interest rates. I assign a Hold investment rating to Affirm Holdings' (NASDAQ:AFRM) shares. Those who understand the pendulum's behavior can benefit enormously. Calculators. Checkout Klarna's funding rounds from January 2020 to July 2022: Klarna's valuation skyrocketed from $5.4B to over $45B in just a year and a half. ~ Howard Marks. Apart from lower GMV, Affirm also has fewer users and merchants than Afterpay and Klarna. We, TechCrunch, are part of the Yahoo family of brands. Figure 8 shows Affirms implied GMV in this scenario compared to its TTM GMV and the GMV of Afterpay and Klarna. I am not receiving compensation for it (other than from Seeking Alpha). While I chose Amazon, analysts can use just about any company to do the same analysis. Affirm ( AFRM) reported better-than-expected fiscal fourth-quarter results. Affirm provides merchants and customers with simple buy now, pay later services and earns a commission on each successful transaction. However, in its S-1, Affirm did disclose its new pay arrangement with CEO Max Levchin. Ill buy it when it hits $30ish after the next bad quarter and we know its coming. Affirm IPO: The online lender reveals more details | Fortune First Quarter FY'23 Highlights (Affirm Holdings, Inc.). So how many years before we declare bankrupcy here? Steer clear unless you plan to go short. Summer Soiree with buy now, pay later solution, Affirm, on May 18, 2022 in New York City. In other words, Affirm has a long way to go before it breaks even. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. With delinquencies also posing a direct and credible threat to Affirm, $13 is unlikely to be the company's lowest point. Affirm's Buy Now Pay Later is about making it easier for customers to pay for merchandise. As operating costs grow about as fast as revenues, Affirm remains highly unprofitable as it grows. How can you seriously consider a EV/Sales of 2,5 to be overvalued when still growing at 20%pa?!?!? Seeing a 71 percent increase in total revenue growth and expanding their network of consumers and merchants by 40 percent year over year, Affirm stock rose by 20 percent following the report. For instance, in thefiscal 4Q21 earnings conference call, management noted that guidance did not include any GMV or revenue from the Amazon partnership. Looking for more investing ideas like this one? With credit problems rising, valuations dropping, and competition from Apple, the best hope for Affirm shareholders could be getting acquired by an incumbent like Capital One I wrote this article myself, and it expresses my own opinions. As always, with Affirm, a lot of interpretation is required. Third, traditional firms have proven track records and decades of experience in using rewards programs to attract new and existing users. Affirm is a leading buy now, pay later startup that made a name for itself during the Covid-19 pandemic due to its rapid expansion of customer and merchant accounts. Affirm stock fell over 60% in 2022 year-to-date, and one of the key reasons is higher-than-expected expenses for Q2 FY 2022. And it's clearly rapidly growing. Combine all this with interest rates climbing, then guess what is to follow. The 2022-23 Coupe de France preliminary rounds, Paris-le-de-France is the qualifying competition to decide which teams from the leagues of the Paris-le-de-France region of France take part in the main competition from the seventh round.. A total of ten teams will progress from the Paris-le-de-France preliminary rounds. Adopting BNPL products and services is obviously a no-brainer for merchants because those products create win-win situations: the availability of BNPL products at checkout increases the merchant's conversion ratios and represents zero-risk. Reddit Sales Growth Slowdown Preceded Fight Over New API Fees Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Press affirm.com/lenders. rates and regulatory headwinds. Investment banks packaged those mortgages into securities and sold them to heavily leveraged financial institutions. net cash stocks, net-nets, low P/B stocks, sum-of-the-parts discounts) and wide moat stocks (i.e. Affirm has a post-money valuation in the range of $1B to $10B as of Sep 17, 2020, according to PrivCo. Key Points Affirm is posting high growth and expanding partnerships and services. For instance, at $29 billion, Afterpay was valued at a 1.4 price to GMV ratio. His net worth is $2.2 billion in 2022, a decrease of around $800 million from what he had back in 2021. Deep Value Returns' Marketplace continues to rapidly grow. Figure 4: Comparing Users and Merchants: Klarna, Afterpay, Affirm: as of June 2021. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. As a growth stock with the bulk of its cash flows expected to be generated in the medium to long term (rather the next few years), its valuation is lower as a result of a higher discount rate using a discounted cash flow's perspective. Compass Point initiated Affirm Holdings (NASDAQ:AFRM) at Neutral, given the stock's premium valuation and lack of growth re-acceleration visibility. Cross River Bank lands $620M for 'crypto-first strategy' SVA and GGV Capital are the most recent investors. In the next section, I assess Affirm Holdings' 2022 outlook to see if there are any opportunities for a positive re-rating of the stock. Affirm qualifies as an Emerging Growth Company, which among other things, means the firm doesnt have to provide the same disclosure on executive compensation arrangements as other publicly traded firms. This report helps investors see just how extreme the risk in AFRM is based on: Rapid Revenue Growth Is No Measure of Success. Instead, due to theproliferation of noise traders, the focus tends toward technical trading trends while high-quality fundamental research is overlooked. And this poses two problems: For Affirm to go from reporting positive 2% adjusted operating margins, see above, and then to move dramatically to negative double digits adjusted operating margins, begs the question of whether Affirm has enough control over its profitability profile? Instead, BNPL is just another form of payment that adds additional debt to consumers without the added benefits that traditional consumer finance firms offer. Who is going to bet against Max? In 2020, Affirm became the exclusive BNPL provider on Shopify, which would seem to be a huge opportunity. A down payment may be required. In fact, AFRM's share price has been on the decline since the start of the year, and I discuss this in the subsequent section. But without any clear path to profitability and paying up for a lot of future growth already, at 20x next year's sales, this takes a lot of serious conviction to make this investment. (Photo by Bennett Raglin/Getty Images for Affirm). I am not receiving compensation for it (other than from Seeking Alpha). Harry Kohl, a Fitch Ratings who covers the asset-backed securities sector, told Bloomberg, When you are originating to borrowers with low or thin credit the younger demographic, essentially thats always a warning for us and something that could be an indicator of potential negative credit performance.. On the other hand, there are worries that AFRM might find it challenging to secure future funding, and this could possibly be a drag on its future growth. For reference, WorldpayestimatesBNPL programs will facilitate nearly $80 billion in U.S. sales in 2024. its results coming out early was just another page out of its book. These firms enjoy significant competitive advantages over the BNPL upstarts when it comes to acquiring and retaining the customers needed to create a profitable consumer finance business. If I assume Affirms invested capital increases at a similar rate in DCF scenarios two and three above, the downside risk is even larger. Delinquency Performance (Affirm Holdings, Inc.). With so many seriously undervalued stocks in the market right now, I will deploy my own capital elsewhere. While the startup grew rapidly during the pandemic, growth in the BNPL industry has begun to slow as a result of rising inflation and slowing economic growth. slowdown in the BNPL industry, the fintech was forced to reduce its sales forecast for the current fiscal year. On that day, the company raised around $1.2 billion in its IPO. AFRM's sales multiple is currently 2.5x, making the stock overvalued given its widening losses and rising delinquencies. A stark business reality faced Reddit before a user uprising engulfed its site this month: slowing sales growth. Figure 3: Gross Merchandise Volume: 4 Largest BNPL Providers: TTM as of June 2021. I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. Feb. 11, 2022 6:31 AM ET Affirm Holdings, Inc. (AFRM) 17 Comments Michael Wiggins De Oliveira Investing Group Leader Summary Affirm's topline impresses, but guidance for upcoming quarters is. Latest Investment Performance. They play the old subprime mortgage game based on new technology.The Amazon deal is catastrophic in terms of EBIT. To justify its price at time of writing of $119/share, Affirm must: For reference, consensus revenue estimates expect revenue to grow 37% in fiscal 2022 and 34% in fiscal 2023 and 2024. Under the arrangement, the CEO is paid a minimal salary and awarded long-term performance-based stock options. The graphic above speaks for itself. But today, Cross River Bank told TechCrunch that it has raised $620 million in funding at a valuation north of $3 billion. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. This is not great news for rivals like Affirm. This was reflected in Affirm Holdings' stock price, as the company's shares fell by -21% from $74.68 as of February 9, 2022 to $58.68 as of February 10, 2022 post-results announcement. Among the company's other announcements, the most interesting one concluded the. State of Wisconsin Investment Board. NEW YORK, NEW YORK - MAY 18: (L-R) Ashley Graham and Mikel Welch attend Ashley Graham co-hosts [+] Summer Soiree with buy now, pay later solution, Affirm, on May 18, 2022 in New York City. Investors that believe BNPL is replacing credit cards at checkout are wrong. For Affirm to be valued higher, delinquency trends must improve and consumer pressure must be at least maintained. Affirm Revenue and Growth Statistics (2023) | SignHouse Affirm Holdings: Great Company, Expensive Stock | Nasdaq If we make the assumption that Affirm continues to rapidly grow, and that next year Affirm's topline increases by 35% relative to this year, which is a big hurdle, as you know, this would see Affirm report $800 million in revenues. However, I think potential acquirers would need a significant discount from current prices to even consider acquiring Affirm. With losses reaching nearly $1.0 billion in the last year, Affirm's business may be as large as the massive 87% valuation cut in 2022 suggests. Even if Affirm can grow revenue by 42% compounded annually for five years and achieve a 16% NOPAT margin, the firm is worth less than $50/share. I have no business relationship with any company whose stock is mentioned in this article. Affirm is currently trading at $13, and the stock could fall much lower if the U.S. economy enters a recession next year and a larger share of consumers begins to default on their BNPL obligations. Affirm AFRM #2653 Rank $4.38 B Marketcap USA Country $14.84 Share price 0.20% Change (1 day) -34.63% Change (1 year) Financial services Categories Market cap Revenue Earnings Price history P/E ratio P/S ratio More Market capitalization of Affirm (AFRM) Market cap: $4.38 Billion As of June 2023 Affirm has a market cap of $4.38 Billion . Non-GAAP metrics allow management significant leeway in removing actual costs of the business to present a more optimistic view. This scenario represents the minimum level of performance required not to destroy value. Every step of its journey as a public company, it has been one surprise after another, leading to wild swings in its share price. Count me among the Affirm bears. However, outside of announcing ongoing testing and upcoming roll out of the service, details are light. 16 Share Price $15.70 (As of Friday Closing) General Information Description Affirm Holdings Inc offers a platform for digital and mobile first commerce. Even if you have big losses sell this pig for what you can get and reinvest in Mastercard or Visa. Discover the best of Paris and its region: museums, monuments, shows, exhibitions and sport events, gastronomy and art of living, parks and gardens, shopping spots, and our selection of themed tours to discover Paris Region as you wish. Health Benefits in Retirement. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Uncover cheap stocks, great businesses listed in Asia focusing on HongKong. We are all working together to compound returns. . Affirm Valuation: Price Forecast 2x In 12 Months? You can change your choices at any time by clicking on the 'Privacy & cookie settings' or 'Privacy dashboard' links on our sites and apps. Let ridesharings inability to achieve profits, a highly unprofitable disruptive technology where the only real differentiator is price, be a warning sign. grows revenue by 35% each year through fiscal 2029 (continuation of 2023 consensus) then, immediately improves its NOPAT margin to 4%, which equals Squares highest ever margin and, $2.8 billion in outstandingemployee stock options(9% of market cap), $77 million intotal debt(<1% of market cap), Rapidly declining market share vs other BNPL apps, Smaller user and merchant base vs. competition, Lack of differentiation in crowded industry, with large incumbents looking to provide more competition, Profitability already well below competition, Valuation implies the firm will be the largest BNPL firm in the world. MoffettNathanson partner, Lisa Ellis, told Yahoo!Finance that the announcement was not a surprise but it indicates commoditization in this space which would naturally pressure standalone players like Affirm and Klarna. What's more, for fiscal 2022 as a whole, Affirm is expecting to report approximately negative 12% adjusted operating margins. Walmart launches The One. if the stock keeps going down the market will be pricing in bankruptcy. If you would like to customise your choices, click 'Manage privacy settings'. Miami Inno - Sports betting platform Betr, co-founded by influencer In 1Q21, Affirm made up just 16% of all BNPL app downloads. Particularly, analysts believe underlying fees and delinquency charges arent always clear up front and obscure the 0% interest advertising. On one hand, AFRM has raised its 2022 guidance and it could possibly be an M&A target. Affirm (NASDAQ: AFRM) stock a fintech company focusing on the buy-now-pay-later (BNPL) business model has been an (initial public offering) IPO that is a big failure. Whats more Brendler sees Apple as competing in a different segment than Affirm and expects that greater regulatory scrutiny of BNPL will keep new rivals from entering the space. Affirm's quarterly sales were $362 million in the first fiscal quarter of 2023, representing a 34% YoY increase. Affirm has all the makings of a successful investment. BNPL's sales volume could top $181 billion by 2022 from $93 billion in 2020, growing more than 40% a year. Affirm's stock has dropped by more than 60%, or -69% to be exact, this year thus far. Latest Valuation (2022) $0.00 BN. I have no business relationship with any company whose stock is mentioned in this article. authenticate users, apply security measures, and prevent spam and abuse, and, display personalised ads and content based on interest profiles, measure the effectiveness of personalised ads and content, and, develop and improve our products and services. Acquisitions completed at these prices would be accretive to Amazons shareholders. Affirm has garnered the attention of investors, in large part due to its revenue growth, which was 81% compounded annually from fiscal 2019-2021 (fiscal year ends June 30). This year, Affirm has lost a terrifying 87% of its valuation as the pandemic faded and investors likely realized they had overvalued high-growth fintechs with massive losses. BetterBrand's new dough raises company's valuation to over $170M grow revenue by 48% compounded annually (more than 2x expected industry CAGR through 2028) for the next eight years. You may opt-out by. When it comes to number of merchants using the service, Affirms merchant base of 29,000 is less than one-third Afterpay and just 12% of Klarnas 250,000+. Its mind boggling to me how people just want to see profit. After reaching a top in. Moreover, the amount of cash Affirm will likely burn as it attempts to breakeven means current investors should expect significant dilution from the debt and equity sales required to fund the cash burn. However, a Seeking Alpha News article published on the same day cited a Bloomberg report which mentioned that AFRM "delayed an asset-backed securities sale after a major investor backed out of the top-rated portion of that deal." As of Mar. Prosus slashes edtech giant Byju's valuation to $5.1 billion Francisco-based FinTech in less than an hour, essentially doubling a pre-existing three-month sell-off that has now cut Affirm's valuation by 60%, while . For example, a $800 purchase could be split into 12 monthly payments of $72.21 at 15% APR, or 4 interest-free payments of $200 every 2 weeks. Affirm Reports Fiscal Year 2022 Second Quarter Results | Affirm Consequently, I suggest that investors need to look beyond its guidance and attempt to think through its value proposition. Bei der Nutzung unserer Websites und Apps verwenden wir, unsere Websites und Apps fr Sie bereitzustellen, Nutzer zu authentifizieren, Sicherheitsmanahmen anzuwenden und Spam und Missbrauch zu verhindern, und, Ihre Nutzung unserer Websites und Apps zu messen, personalisierte Werbung und Inhalte auf der Grundlage von Interessenprofilen anzuzeigen, die Effektivitt von personalisierten Anzeigen und Inhalten zu messen, sowie, unsere Produkte und Dienstleistungen zu entwickeln und zu verbessern. Even managements guidance lacks a vision to profitability. Why Affirm Stock Sagged 38% in April | The Motley Fool Its insane. This was lower than the +115% YoY growth in GMV or Gross Merchandise Volume for Affirm Holdings from $2.1 billion to $4.5 billion over the same period. Find out more about how we use your personal data in our privacy policy and cookie policy. net cash stocks, net-nets, low P/B stocks, sum-of-the-parts discounts) and wide moat stocks (i.e. This implies that investors are being asked to pay 20x not this year's revenues, but next year's revenues. Affirm Holdings, Inc. (AFRM) Valuation Measures & Financial Statistics After all, Affirm Holdings whose stock trades 93% below its November 2021 high does something similar. Many credit card providers already allow users to create payment pans on larger purchases, and Mastercardrecentlyannounced a new BNPL offering that will incorporate consumer protections and be available to merchants with zero effort on their part. [1]Only Core Earnings enable investors to overcome the inaccuracies, omissions and biases in legacy fundamental data and research, as proven inCore Earnings: New Data & Evidence, written by professors at Harvard Business School (HBS) & MIT Sloan and published inThe Journal of Financial Economics. platform, as well as fees from the use of its virtual cards, which customers can use for in-store or online purchases. Analysts Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. There were no adjustments that increased shareholder value. Then, it put out seriously low guidance for its upcoming quarters. Affirmsinvested capital turns, a measure of balance sheet efficiency, also rank below its biggest competitors in Square (SQ) and PayPal (PYPL), along with Mastercard (MA), Synchrony Financial (SYF), and American Express (AXP). The operating loss for the fiscal quarter ending September 30, 2022 was $287 million, up from $277 million in the previous quarter. Affirm (AFRM) - Market capitalization - CompaniesMarketCap.com Each implied price is based on a goal ROIC assuming different levels of revenue growth. Affirm is worth just $44/share today a 63% downside to the price at time of writing. Affirm's Results Affirm My Thesis: Sell This Stock Please. A Quality Executive Compensation Plan Lowers The Risk Of Investing In Paccar Inc. Whats Next For Walgreens Stock After A 9% Fall Yesterday?
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