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1. Company Snapshot

1.a. Company Description

Affirm Holdings, Inc.operates a platform for digital and mobile-first commerce in the United States and Canada.The company's platform includes point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app.


Its payments network and partnership with an originating bank, enables consumers to pay for a purchase over time with terms ranging from one to forty-eight months.As of June 30, 2021, the company had approximately 29,000 merchants integrated on its platform covering small businesses, large enterprises, direct-to-consumer brands, brick-and-mortar stores, and companies.Its merchants represent a range of industries, including sporting goods and outdoors, furniture and homewares, travel, apparel, accessories, consumer electronics, and jewelry.


The company was founded in 2012 and is headquartered in San Francisco, California.

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1.b. Last Insights on AFRM

Affirm Holdings' recent performance was negatively impacted by concerns over its "meme stock" status, with some analysts expressing caution due to the company's business model catering to low-end consumers. Additionally, the stock's premium valuation has raised investor concerns. Despite strong revenue and earnings growth estimates, the company's Q1 earnings report was met with a mixed response. Insider selling, including a substantial share sale by CEO Max Levchin, has also weighed on the stock. Furthermore, the company's crowded fintech sector and intense competition have made it challenging for Affirm to stand out.

1.c. Company Highlights

2. Affirm Holdings' Strong Q1 Fiscal 2026 Earnings: A Closer Look

Affirm Holdings reported a robust first quarter fiscal 2026, with revenues exceeding analyst estimates. The actual EPS came out at $0.23, significantly higher than the estimated $0.11. Revenue growth was driven by a strong increase in gross merchandise volume (GMV), with the company also reporting an operating margin expected to be above 7.5% for the full year. As Max Levchin mentioned, "We've been investing heavily in engaging consumers directly, with events like the 0% Days promo, and will continue to do so." The company's ability to execute well in the face of a challenging funding market is a testament to its robust business model.

Publication Date: Nov -15

📋 Highlights
  • ABS Market Execution: Successfully priced ABS deal, expanding relationships with blue-chip forward flow buyers to scale the ABS program.
  • RLTC Trends: RLTC rate rose 48 bps to 4.2%, with a target upper bound of 4% for fiscal 2026.
  • 0% APR Loan Growth: 0% APR loans are the fastest-growing product, driving GMV growth and capturing higher-quality consumers.
  • Operating Margin Guidance: Full-year operating margins expected above 7.5%, driven by growth, not cost-cutting.
  • PSP Strategy Expansion: Focused on diversifying access via PSPs (e.g., Worldpay) to ensure Affirm is "available everywhere."

Revenue Growth and Profitability

The company's revenue growth was driven by a 0% monthly installment loan product, which continues to be the fastest-growing loan product. The revenue less transaction cost (RLTC) take rate is expected to be in the range of 3% to 4%, with the company targeting 4% as an upper bound. The company's ability to maintain a high operating margin is a positive sign, driven by growth rather than cost-cutting measures.

Valuation Metrics

Looking at the valuation metrics, Affirm Holdings has a P/S Ratio of 6.64, indicating that the stock may be slightly overvalued given the revenue growth. The ROE of 7.75% is relatively modest, and the ROIC of 0.92% suggests that the company is not generating significant returns on its invested capital. Analysts estimate revenue growth at 26.9% for next year, which may justify the current valuation to some extent.

Growth Drivers and Challenges

The company's growth is driven by its expanding partnerships, including the recent extension of its agreement with Amazon. The company's ability to capture more meaningful share of consumer spend, especially among its direct-to-consumer channels, is a positive sign. However, the rising Risk of Loss to Capital (RLTC) rate is a challenge that the company needs to manage. As Robert O'Hare noted, "We're really focused on 4% being an upper bound for revenue less transaction cost take rates."

Competitive Landscape

The company's competitive landscape is evolving, with Affirm expanding into new verticals such as service titan and automotive repair. Max Levchin stated that their robust process for building and modifying models is a key factor in their ability to quickly enter new verticals. The company's expansion into the U.K. with Shopify is also giving competitors a challenge.

3. NewsRoom

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From fashion throwbacks to trendy new drops, Pacsun shoppers can now pay over time with Affirm

Dec -04

Source: businesswire.com

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Is Affirm Stock Yesterday's News?

Dec -03

Source: fool.com

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Affirm Holdings, Inc. (AFRM) Presents at UBS Global Technology and AI Conference 2025 Transcript

Dec -03

Source: seekingalpha.com

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Can Affirm's Low-Ticket Purchases Outgrow Its Big-Ticket Categories?

Dec -02

Source: zacks.com

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Jim Cramer Recommends Selling Klarna, Buying This Tech Stock

Dec -02

Source: benzinga.com

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Buy Now, Pay Later Companies Asked to Share Lending Practices

Dec -01

Source: wsj.com

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Retail Stocks Usually Rise the Week After Black Friday. This BNPL Play Stands Out.

Nov -29

Source: barrons.com

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Mastercard's Stability Vs. Affirm's Velocity: Which Has More Upside?

Nov -27

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (19.50%)

6. Segments

Interest

Expected Growth: 19.3%

Affirm Holdings, Inc.'s 19.3% interest growth is driven by increasing adoption of buy-now-pay-later (BNPL) solutions, expansion into new merchant partnerships, and rising consumer demand for flexible payment options. Additionally, the company's focus on transparency, fairness, and consumer-friendly practices has contributed to its growing popularity, leading to increased interest income.

Merchant Network

Expected Growth: 21.67%

Affirm Holdings' Merchant Network growth of 21.67% is driven by increasing adoption of 'buy now, pay later' solutions, expansion into new merchant categories, and strategic partnerships. Additionally, the rise of e-commerce and growing consumer preference for flexible payment options contribute to the segment's growth.

Gain on Sales of Loans

Expected Growth: 22.95%

The 22.95% gain on sales of loans from Affirm Holdings, Inc. is driven by increasing adoption of buy-now-pay-later solutions, expansion into new merchant partnerships, and growth in point-of-sale payment volumes. Additionally, Affirm's focus on consumer-friendly financing options and its ability to provide transparent and flexible repayment terms have contributed to its rapid growth.

Card Network

Expected Growth: 10.88%

Affirm Holdings' Card Network growth of 10.88% is driven by increasing adoption of buy-now-pay-later (BNPL) solutions, expansion into new merchant partnerships, and rising consumer demand for flexible payment options. Additionally, the company's focus on transparency, consumer-friendly terms, and seamless user experience contribute to its growth momentum.

Servicing

Expected Growth: 12.8%

Affirm Holdings' 12.8% growth in servicing is driven by increasing adoption of 'buy now, pay later' solutions, expansion into new merchant partnerships, and rising consumer demand for flexible payment options. Additionally, Affirm's technology-driven platform and data-driven approach to underwriting have enabled the company to efficiently scale its servicing capabilities, further contributing to its growth.

7. Detailed Products

Point of Sale (POS) Financing

Affirm offers point-of-sale financing solutions that allow consumers to pay for purchases over time, providing a seamless and transparent financing experience.

Virtual Card

Affirm's Virtual Card is a digital payment method that allows consumers to pay for online purchases in installments, providing a convenient and flexible payment option.

Debit Card

Affirm's Debit Card is a debit card that allows consumers to earn rewards and cashback on their purchases, while also providing access to Affirm's financing options.

Savings Account

Affirm's Savings Account is a high-yield savings account that allows consumers to earn interest on their deposits, with no fees or minimums.

8. Affirm Holdings, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Affirm Holdings, Inc. is medium because while there are some alternative financing options available, Affirm's point-of-sale financing solutions are still relatively unique and convenient for consumers.

Bargaining Power Of Customers

The bargaining power of customers is low because individual consumers have limited negotiating power when it comes to financing options, and Affirm's partnerships with merchants give it an advantage in terms of pricing and terms.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low because Affirm is not heavily reliant on a single supplier, and its technology platform allows it to maintain control over its supply chain and operations.

Threat Of New Entrants

The threat of new entrants is high because the fintech industry is rapidly evolving, and new companies are emerging with innovative financing solutions that could potentially compete with Affirm's offerings.

Intensity Of Rivalry

The intensity of rivalry is medium because while there are some established players in the point-of-sale financing market, Affirm's strong partnerships and technology platform give it a competitive advantage, but it still faces competition from other fintech companies.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 69.11%
Debt Cost 3.95%
Equity Weight 30.89%
Equity Cost 21.78%
WACC 9.45%
Leverage 223.73%

11. Quality Control: Affirm Holdings, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Toast

A-Score: 4.6/10

Value: 0.9

Growth: 9.1

Quality: 6.4

Yield: 0.0

Momentum: 7.5

Volatility: 4.0

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Altair Engineering

A-Score: 4.5/10

Value: 2.0

Growth: 6.7

Quality: 5.3

Yield: 0.0

Momentum: 7.0

Volatility: 6.0

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Robinhood Markets

A-Score: 4.5/10

Value: 0.3

Growth: 7.2

Quality: 7.0

Yield: 0.0

Momentum: 10.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
Affirm

A-Score: 3.8/10

Value: 0.7

Growth: 9.1

Quality: 3.1

Yield: 0.0

Momentum: 8.0

Volatility: 2.0

1-Year Total Return ->

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DigitalOcean

A-Score: 3.8/10

Value: 3.8

Growth: 9.2

Quality: 5.3

Yield: 0.0

Momentum: 2.5

Volatility: 2.0

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HashiCorp

A-Score: 3.8/10

Value: 4.2

Growth: 4.4

Quality: 3.6

Yield: 0.0

Momentum: 5.5

Volatility: 5.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

68.69$

Current Price

68.69$

Potential

-0.00%

Expected Cash-Flows