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Analyzing Affirm (AFRM) Stock: Is Buy Strategy the Right Move?
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Affirm Holdings, Inc. (AFRM - Free Report) exhibits strong growth potential, driven by increasing active merchant numbers, a flourishing buy now, pay later (BNPL) landscape and a rising Gross Merchandise Volume (“GMV”). The company's robust transaction volumes and interest income contribute significantly to its positive outlook. The stock has experienced an impressive 70.9% surge in the past three months, surpassing the industryaverage of 2.6%.
Affirm — with a market cap of almost $11.6 billion — is a platform for digital and mobile-first commerce that offers financial products. With promising prospects and a Zacks Rank #2 (Buy), this stock presents an attractive investment opportunity for your portfolio now.
Let’s delve deeper.
The Zacks Consensus Estimate for AFRM’s current-year earnings indicates a 111.7% year-over-year improvement. The stock has witnessed three upward estimate revisions in the past 30 days against none in the opposite direction. Affirm beat on earnings in two of the last four quarters and missed twice. This is depicted in the graph below.
The company anticipates reaching a notable milestone by achieving full fiscal year 2024 profitability on an adjusted operating income basis. The adjusted operating margin is anticipated to be more than 5% for fiscal year 2024, marking a massive improvement from a year ago.
Fiscal year 2024 revenues, as a percentage of GMV, are expected to align closely with the fiscal 2023 level of 7.9%. The consensus mark for current-year revenues is pegged at nearly $2 billion, suggesting a 25.4% rise from the prior year’s reported number. The expected growth will be supported by increasing GMV and transaction volumes. Management is optimistic about achieving a fiscal 2024 GMV surpassing $24.25 billion, signifying notable growth from the previous year's $20.2 billion.
A report on BNPL trends from Adobe Analytics showed that in November, purchases made with BNPL services have fueled online spending. The deferred payment financial service is playing a major role in consumer spending resilience observed in recent times. AFRM is expected to continue riding this momentum in the coming days.
Consistent and disciplined performance in recent quarters has become a catalyst for Affirm's network growth. Per the Zacks Consensus Estimate, AFRM is poised for robust 14.8% year-over-year growth in merchant network revenues for the current year. Additionally, the consensus projection for card network revenues in the same period anticipates a significant 12.7% increase compared to the previous year. These positive estimates underscore the company's ability to capitalize on its operational strengths and market positioning.
Affirm continues to reap the rewards of a high interest environment, contributing to its positive top-line performance. In the preceding year, the interest income metric surged by an impressive 29.8%, reaching $685.2 million. The Zacks Consensus Estimate for the current year reinforces this trend, indicating a 53% year-over-year upswing in interest income.
Key Risks
However, there are a few factors that investors should keep an eye on. Growing competition in the BNPL sector and higher funding costs, driven by factors like high interest rates and limited consumer loan demand in the secondary market, pose challenges to Affirm's growth. Nevertheless, we believe that a systematic and strategic plan of action will drive its performance in the long term.
The Zacks Consensus Estimate for FirstCash’s current year bottom line indicates 13.1% year-over-year growth. Headquartered in Fort Worth, TX, FCFS beat earnings estimates in all the past four quarters, with an average surprise of 7.9%.
The Zacks Consensus Estimate for Shift4 Payments’ current year earnings is pegged at $2.92 per share, which calls for 110.1% year-over-year growth. Allentown, PA-based FOUR beat earnings estimates in all the past four quarters, with an average surprise of 25%.
The Zacks Consensus Estimate for RB Global’s current year bottom line suggests 12.5% year-over-year growth. Based in Westchester, IL, RBA beat earnings estimates in each of the past four quarters, with an average surprise of 18.9%.
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Analyzing Affirm (AFRM) Stock: Is Buy Strategy the Right Move?
Affirm Holdings, Inc. (AFRM - Free Report) exhibits strong growth potential, driven by increasing active merchant numbers, a flourishing buy now, pay later (BNPL) landscape and a rising Gross Merchandise Volume (“GMV”). The company's robust transaction volumes and interest income contribute significantly to its positive outlook. The stock has experienced an impressive 70.9% surge in the past three months, surpassing the industryaverage of 2.6%.
Affirm — with a market cap of almost $11.6 billion — is a platform for digital and mobile-first commerce that offers financial products. With promising prospects and a Zacks Rank #2 (Buy), this stock presents an attractive investment opportunity for your portfolio now.
Let’s delve deeper.
The Zacks Consensus Estimate for AFRM’s current-year earnings indicates a 111.7% year-over-year improvement. The stock has witnessed three upward estimate revisions in the past 30 days against none in the opposite direction. Affirm beat on earnings in two of the last four quarters and missed twice. This is depicted in the graph below.
Affirm Holdings, Inc. Price and EPS Surprise
Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. Quote
The company anticipates reaching a notable milestone by achieving full fiscal year 2024 profitability on an adjusted operating income basis. The adjusted operating margin is anticipated to be more than 5% for fiscal year 2024, marking a massive improvement from a year ago.
Fiscal year 2024 revenues, as a percentage of GMV, are expected to align closely with the fiscal 2023 level of 7.9%. The consensus mark for current-year revenues is pegged at nearly $2 billion, suggesting a 25.4% rise from the prior year’s reported number. The expected growth will be supported by increasing GMV and transaction volumes. Management is optimistic about achieving a fiscal 2024 GMV surpassing $24.25 billion, signifying notable growth from the previous year's $20.2 billion.
A report on BNPL trends from Adobe Analytics showed that in November, purchases made with BNPL services have fueled online spending. The deferred payment financial service is playing a major role in consumer spending resilience observed in recent times. AFRM is expected to continue riding this momentum in the coming days.
Consistent and disciplined performance in recent quarters has become a catalyst for Affirm's network growth. Per the Zacks Consensus Estimate, AFRM is poised for robust 14.8% year-over-year growth in merchant network revenues for the current year. Additionally, the consensus projection for card network revenues in the same period anticipates a significant 12.7% increase compared to the previous year. These positive estimates underscore the company's ability to capitalize on its operational strengths and market positioning.
Affirm continues to reap the rewards of a high interest environment, contributing to its positive top-line performance. In the preceding year, the interest income metric surged by an impressive 29.8%, reaching $685.2 million. The Zacks Consensus Estimate for the current year reinforces this trend, indicating a 53% year-over-year upswing in interest income.
Key Risks
However, there are a few factors that investors should keep an eye on. Growing competition in the BNPL sector and higher funding costs, driven by factors like high interest rates and limited consumer loan demand in the secondary market, pose challenges to Affirm's growth. Nevertheless, we believe that a systematic and strategic plan of action will drive its performance in the long term.
Other Key Picks in Business Services
Some other top-ranked stocks in the broader Business Services space are FirstCash Holdings, Inc. (FCFS - Free Report) , Shift4 Payments, Inc. (FOUR - Free Report) and RB Global, Inc. (RBA - Free Report) . While FirstCash and Shift4 Payments each currently sport a Zacks Rank #1 (Strong Buy), RB Global carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FirstCash’s current year bottom line indicates 13.1% year-over-year growth. Headquartered in Fort Worth, TX, FCFS beat earnings estimates in all the past four quarters, with an average surprise of 7.9%.
The Zacks Consensus Estimate for Shift4 Payments’ current year earnings is pegged at $2.92 per share, which calls for 110.1% year-over-year growth. Allentown, PA-based FOUR beat earnings estimates in all the past four quarters, with an average surprise of 25%.
The Zacks Consensus Estimate for RB Global’s current year bottom line suggests 12.5% year-over-year growth. Based in Westchester, IL, RBA beat earnings estimates in each of the past four quarters, with an average surprise of 18.9%.