Buy now, later, or never?
Affirm’s approach to interest-free deferred payments helped push the company into the spotlight during the pandemic. The company struck major partnerships with companies like Peloton, Shopify, and Amazon. In November, Affirm reached a high of $176 a share. Now, the company’s stock price sits at just $15, a 90% drop from the highs. Today, aftermarket close, Affirm reports its third-quarter report and hopes to spark a turnaround. Let’s take a look at the numbers and see if Affirm is a buy now, or wait until later.
Affirm’s share price might be falling, but its revenue growth has remained above 50% since the company went public. Can Affirm assure investors in today’s earnings report that it can sustain high growth for the foreseeable future?
Growth is one part of the equation, but so is profit. In today’s market, profitability is in focus more than ever. If you haven’t noticed, growth stocks have been hit the hardest in part because many of them are still losing money. Unfortunately for Affirm, it’s one of these unprofitable growth stocks. In fact, among its financial technology peers, only Robinhood is less profitable.
Guilty by Association?
Another reason behind Affirm’s recent struggles could simply be its exposure to the financial technology industry. Affirm’s friends haven’t been doing so hot. Most recently, Upstart reported horrendous earnings and dropped 56% the next day. As it currently stands, Affirm is the second-worst fintech performer relative to its 52wk high.
Needs a Knockout
Even after this drop, Affirm currently has the highest valuation multiple at 6x revenue. This reflects a hefty premium to other stocks in this group like Upstart, Coinbase, and Block, while its growth is only in the middle of the pack. Can Affirm justify this premium valuation with a knockout earnings report or could it face the same fate as Upstart post-earnings?
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