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The buy now pay later (BNPL) space is a burgeoning payments niche within fintech. Consumers have flocked to the payment installments thanks to the low interest model compared to credit cards. One of the stocks that has been out front in this market is Affirm Holdings (AFRM).
Fintech stocks have a habit of being volatile, and Affirm is no exception, with a 52-week range of $8.62-$83.57 as of early 2023. After a challenging 2022, analysts are turning bullish on AFRM stock price. However, the stock poses some risk due to its volatile nature and lack of profits.
Affirm is considered a leader in the BNPL space. Affirm is basically a lender, though its loans are mainly provided through Cross River Bank. The loans are provided as installment agreements to consumers, who are then obligated to make payments with low or no interest over a series of weeks or months. Affirm’s BNPL model is supported by thousands of merchants, including the likes of iPhone maker Apple, e-commerce giant Amazon and retailer WalMart.
How do we estimate AFRM will do in 2023?
One of the main drivers of Affirm’s growth is its partnership with Amazon.com Inc. (NASDAQ: AMZN), which was announced in August 2021. The deal allows Amazon customers in the U.S. to use Affirm’s BNPL service at checkout for purchases of $50 or more.
According to Affirm’s CEO Max Levchin, this partnership could add millions of new customers and billions of dollars in revenue for Affirm over time. However, it also comes with some challenges such as increased competition from other BNPL players such as PayPal Holdings Inc. (NASDAQ: PYPL), Klarna AB and Afterpay Ltd., as well as regulatory scrutiny from lawmakers who are concerned about consumer protection and debt accumulation.
Another factor that could affect Affirm’s stock performance is its ability to diversify its revenue streams and expand its product offerings beyond BNPL. For example, in November 2021, Affirm launched its own debit card that allows users to access their available balance and earn cashback on purchases (money.cnn.com). The company also acquired Returnly Technologies Inc., a platform that helps online retailers process returns and exchanges (marketbeat.com).
Moreover, Affirm is investing heavily in innovation and technology to improve its customer experience and retention. For instance, in December 2021, Affirm introduced a new feature called “Shop Now” that allows users to browse products from thousands of merchants within the Affirm app. The company also uses artificial intelligence and machine learnign for its credit risk models and underwriting algorithms.
Based on these factors, analysts have different opinions on Affirm’s stock outlook for 2023. According to PandaForecast.com, an online platform that provides stock forecasts based on historical data and trends analysis.
Conclusion
In conclusion, Affirm Holdings (AFRM) is a leading player in the rapidly growing buy now, pay later (BNPL) space, with significant partnerships and a diversified product offering. The company’s partnership with Amazon has the potential to boost its customer base and revenue significantly. However, it faces challenges such as increased competition, regulatory scrutiny, and the need to diversify its revenue streams. While Affirm continues to invest in innovation and technology, its stock remains volatile, and opinions on its outlook for 2023 vary among analysts. Investors should carefully consider these factors and their risk appetite before making decisions about AFRM stock.
FAQs
Some of Affirm’s key rivals in the BNPL space include Afterpay, Klarna, and PayPal. Also, banks like JPMorgan are also beginning to offer BNPL services and therefore also compete.
Affirm earns revenue from merchants, which are the businesses it partners with. These include retailers like Amazon and Walmart. In some cases, Affirm also charges consumers interest.
In its outlook, Affirm has stated that it expects to be a profitable company by the end of its fiscal year 2023. Nevertheless, you should consider that companies are not always able to comply with their plans.
The biggest risks are a slowing economy and negative consumer sentiment. If consumers aren’t spending money, Affirm is at risk of seeing its revenue decline, which could ultimately be reflected in the stock price.
AFRM stock is a long way from its all-time high of $168 in 2021. The highest Wall Street analyst price target is currently $46. So don’t hold your breath for the stock to reclaim $168 anytime soon.
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