Affirm continues to grow, but it’s hard to make money buying now, paying later

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(Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images) SOPA Images/LightRocket via Gett SOPA Images/LightRocket via Gett

Affirmed, the Buy Now Pay Later (BNPL) company launched by Paypal co-founder Max Levchin announced its fiscal fourth quarter results today (August 25). The company reported quarterly revenue of $364 million, beating analysts’ forecasts, but the company continues to be unprofitable. It lost 65 cents per share during the quarter.

Although Affirm is one of the largest BNPL companies in the world and continues to grow, its stock, along with many fintech companies, has had a dismal year. In November, shares of Affirm were trading at over $160 per share; to date, shares of Affirm were trading at around $30. After the market closed, the stock fell more than 15%.

The global BNPL market was estimated at $132 billion in 2021, and some studies predict it will reach $3.68 trillion by 2030.

Some stock analysts have expressed concern about Affirm’s future prospects in a space that is becoming increasingly competitive. Today, Affirm competes not only with other BNPL companies like Klarna and Afterpay, but also with traditional lenders and credit card companies, which have started offering BNPL services to consumers. One advantage Affirm enjoys is that it has an exclusive agreement with Amazon; however, this exclusivity expires in January 2023.

The global macroeconomic environment is a mixed blessing for Affirm. On the one hand, inflation and rising interest rates make BNPL services attractive to many consumers because Affirm borrowers who repay their loans on time pay no interest. On the other hand, rising interest rates also make it more expensive for Affirm to borrow the money it in turn lends to consumers. In a research note published Aug. 23, Morgan Stanley noted that “rising credit rates and spreads have raised concerns among investors about Affirm’s funding cost efficiency and ability to access additional capital”.

Charlotte Principato, financial services analyst at Morning Consult, studies consumer usage of BNPL and believes the sector will continue to thrive, especially as back-to-school and holiday spending picks up later this year. She expects BNPL to continue to expand beyond its hardcore teen and millennial audience. “There are more Gen Xers who want to try BNPL than those who don’t. don’t,” Principato said in an interview. “I think there is pent-up demand there.”

Affirm continues to grow, but it's hard to make money buying now, paying later

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