Is Affirm a buy?

It’s time to visit a popular e-commerce company. Here is the break down of $AFRM, otherwise known as Affirm.


Current Price: $60.85

52/Wk High: $146.90

52/Wk Low: $46.50


Market Cap: $16.1 Billion


Read below for break down!


Affirm ($AFRM) is an up and coming digital commerce platform that allows customers to purchase a product and make payments over time. Affirm’s platform continues to grow in popularity and it’s integration is seen in a vast array of companies including Walmart, Peloton, Expedia, Adidas, Shopify, and more.


The company is led by CEO and founder Max Levchin. Levchin has been an icon of the commerce and digital payments space after co-founding PayPal in 1998 and working as CTO of PayPal up until his departure in 2002.


In recent news, Affirm closed their acquisition of Returnly in a cash and equity deal valued at $300 million. Returnly is a financial technology company that provides direct-to-consumer companies the proper technology to offer a quick and simple product return process.


“We have demonstrated how Affirm can accelerate growth by helping merchants reach new customers and drive conversions. With Returnly, Affirm addresses the full shopping journey by enabling seamless return experiences that drive loyalty and satisfaction,” Levchin said.


Rounding out acquisitions, Affirm acquired PayBright for CAD $340 million in mid December. PayBright is Canada’s leading buy now and pay later platform. According to management the acquisition will increase Affirm’s North America footprint and accelerate the scaling process.


Digging into the numbers, Affirm missed Q3 2021 expectations with an EPS of $-1.06, lower than the analyst’s EPS consensus estimate of $-0.29. On a quarter-over-quarter basis, EPS declined significantly from the Q2 2021 level of $-0.45.


Revenues on the other hand continued to expand with Q3 revenues totaling $230.7 million, representing a strong 67% year-over-year jump. According to leadership, revenues were driven by “increases in network revenue and interest income”.



Gross merchandise volume (GMV) also continued to grow, with GMV increasing by 83% year-over-year to a strong $2.3 billion. Excluding the recall of Peloton products, Affirm noted that GMV expansion would have increased by 100% year-over-year.


Sifting through Affirm’s user base, active merchants more than doubled throughout the quarter to a strong 12,000 and counting while active consumers expanded by 60% to a sizable 5.4 million in Q3.

While revenues, GMV, and customers continued to grow Affirm reported a sizable operating loss of $169.5 million. The operating loss is significantly larger than the Q3 2020 level of $81.5 million and was attributed to IPO compensation costs.


On the flip side, adjusted operating income improved, totaling $4.9 million for the quarter. For comparison, the Q3 2020 adjusted operating income was a loss, totaling $-70.7 million.


Net loss continued to deepen as well with the Q3 2021 net loss totaling $247.2 million compared to the 2020 level of $85.6 million. The significantly larger loss was attributed to IPO and acquisition costs.


Shifting into margins, operating margin worsened from -58.9% to -73.5% all the while adjusted operating margin improved from -51.1% to a better 2.1%.


Management was upbeat.


"Affirm’s strong third quarter results reflect continued progress toward building the most valuable and transparent financial network for consumers and merchants," Levchin said.


Affirm increased guidance as well, now expecting GMV to land within a range of $2.20 billion to $2.25 billion in Q4. Revenues are expected to land within a range of $215 million to $225 million.


Shifting into the balance sheet the numbers are solid.


Total Debt: $2.002 Billion


Total Liabilities: $2.362 Billion


Total Assets: $4.766 Billion


Cash & Short Term Inv: $1.624 Billion


On a valuation basis, Affirm does trade at a premium.

Price to Sales: 21.60x


Price to Book: 6.31x


Given the numbers the analysts are bullish with a mean price target of $75.27/share, representing 23.78% upside.


The high price target is $93.00/share, representing a 52.94% gain, while the low price target is $56.00/share, representing a -7.91% downside.


The big money is quite involved with 71.06% of Affirm being owned by institutions. Top holders include GIC Private Limited, Lightspeed Venture Partners, and Baillie Gifford & Company.


Technically, Affirm could be presenting opportunity. According to the six-month charts the MACD is building upside momentum within a range of -2.92 down to -4.35.


The six-month charts are also indicating an RSI of 52.37 and CCI of 96.13, both of which are neutral.



Looking to the future the risks are minimal especially with the sizable partnerships the company continues to strengthen, such as Affirm’s partnership with Shopify.


In short, Affirm ($AFRM) is a solid digital commerce investment with a reliable management team, an expanding customer base, growing revenues, and simple business model.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.