Affirm Holdings Inc (AFRM)AFRM

Affirm Holdings Inc.: A Comprehensive Overview

Company Profile:

History: Founded in 2012 by Max Levchin and Nathan Getgood, Affirm started as a small San Francisco startup offering point-of-sale installment loans. It quickly grew to become a leading player in the buy-now-pay-later (BNPL) market, partnering with large retailers like Amazon and Walmart.

Core Business: Affirm provides BNPL services to consumers at the point of sale. This allows customers to purchase items and pay for them in installments, often without incurring interest charges. Affirm earns revenue from merchants in the form of fees and interest charges on loans.

Leadership: Max Levchin serves as CEO, while Michael Linse is the CFO. The leadership team comprises experienced individuals with backgrounds in technology, finance, and e-commerce.

Products:

• Affirm Virtual Card: A virtual credit card that can be used for online purchases.
• In-store financing: Point-of-sale installment loans offered at various retail locations.
• Pay in 4: An option to split purchases into four equal installments over six weeks, with no interest or late fees.
• Affirm app: A mobile app for managing purchases, viewing payment schedules, and making payments.

Market Share: Affirm holds a significant market share in the US BNPL market. According to a recent report by Allied Market Research, Affirm accounted for 34.8% of the US BNPL market in 2022.

Total Addressable Market: The global BNPL market is expected to reach USD 27.24 billion by 2028, growing at a CAGR of 22.6% from 2022 to 2028. This represents a substantial market opportunity for Affirm.

Financial Performance:

• Revenue: Affirm's total revenue for the fiscal year ending June 2023 was USD 1.34 billion, a 55% increase year-over-year.
• Net income: The company reported a net loss of USD 928.5 million in fiscal 2023, compared to a net loss of USD 152.9 million in the previous year.
• Profit margins: Gross profit margin for fiscal 2023 was 60.4%, while the operating margin was -69.4%.
• Earnings per share (EPS): Affirm's EPS in fiscal 2023 was -USD 5.36, compared to -USD 0.89 in fiscal 2022.

Year-over-year Comparison: Affirm has experienced rapid revenue growth in recent years. This is primarily due to the rising popularity of BNPL and the company's partnerships with large retailers. However, the company is still operating at a loss.

Cash flow and balance sheet: As of June 30, 2023, Affirm had USD 2.14 billion in cash and cash equivalents. Its long-term debt stood at USD 1.14 billion.

Dividends and Shareholder Returns: Affirm does not pay dividends to shareholders as it is currently focused on investing in growth.

Stock performance in past 1 year, 5 years, 10 years: Affirm's stock price has been volatile in recent years. The stock has declined significantly since its IPO in January 2021, falling from a high of USD 176.2 per share to USD 25.14 per share on October 26, 2023.

Growth Trajectory: Affirm has ambitious growth plans. The company aims to expand its reach to new markets, including Europe, and launch new products and services. However, the company faces stiff competition from other BNPL players, and its profitability remains uncertain.

Market Dynamics: The BNPL industry is still evolving. Regulatory scrutiny is increasing, and there are concerns about the potential impact of BNPL on consumer debt levels. However, the BNPL market is expected to continue to grow in the coming years, driven by the increasing popularity of online shopping and the growing demand for flexible payment options.

Competition: Key competitors include PayPal (PYPL), Block (SQ), Klarna, Afterpay (APT), and Zip Co (Z1P). Affirm holds a competitive edge due to its focus on partnerships with large retailers and its strong brand reputation.

Challenges:

• Competition: The BNPL market is becoming increasingly competitive.
• Regulation: The BNPL industry is facing increased regulatory scrutiny.
• Profitability: Affirm is currently operating at a loss.
• Economic downturn: An economic downturn could lead to a decrease in consumer spending and an increase in bad loans for Affirm.

Opportunities:

• Technological advancements: Affirm is developing innovative technologies, such as its AI-powered risk assessment tool.
• Expanding market: The global BNPL market is expected to grow significantly in the coming years.
• New partnerships: Affirm is forging partnerships with new merchants and financial institutions.

Recent Acquisitions:

• In 2021, Affirm acquired PayBright, a Canadian BNPL provider, for USD 275 million. This acquisition expanded Affirm's reach into the Canadian market.
• In 2022, Affirm acquired Returnly, a returns processing platform, for USD 315 million. This acquisition aimed to improve the customer experience and reduce costs for Affirm's merchants.

AI-Based Fundamental Rating: Based on an analysis of Affirm's financials, market position, and future prospects, the AI-based fundamental rating for Affirm Holdings Inc. is 6 out of 10.

Sources and Disclaimers:

• This report was based on data from the following sources:
  • Affirm Holdings Inc. financial statements
  • Investor presentations
  • News articles
  • Market research reports
• Information presented here should not be considered financial advice. Please conduct your own due diligence before making investment decisions.

This overview aims to provide a comprehensive understanding of Affirm Holdings Inc. Please remember that the financial landscape can be dynamic, and the information presented here may become outdated over time. It's crucial to conduct further research and consult with a financial advisor for personalized investment guidance.