Buy now and pay later purchase financing provider Affirm Holdings (NASDAQ:AFRM) stock has been on catastrophic sell-off since peaking out at $176.65 on Nov. 8, 2021.
The popular buy-now-pay-later (BNPL) platform was hit by a perfect storm consisting of the macro market sell-off, regulatory scrutiny, and a complete sentiment shift in the BNPL segment despite improving growth.
Affirm insists it’s a technology company started by engineers enabling its platform to operate flawlessly at scale. This has attracted well-known merchant clients including Target (NYSE:TGT), Shopify (NYSE:SHOP), and Amazon (NASDAQ:AMZN).
While 80% of commerce is conducted offline, Affirm is on websites that generate more than 50% of all the e-commerce in the U.S.
To grow its offline point-of-sale (POS) market penetration, Affirm partnered with Visa (NYSE:V) to roll out its Debit+ product later this year.
Prudent investors looking for exposure in the BNPL segment can look for opportunistic pullback levels in shares of Affirm.
Q2 Fiscal 2022 Earnings Release
On Feb. 10, 2022, Affirm released its fiscal second-quarter 2022 results for the quarter ending December 2021. The Company reported an adjusted earnings-per-share (EPS) loss of (-$0.57) excluding non-recurring items meeting consensus analyst estimates for a loss of (-$0.22).
Revenues grew by 77% year-over-year (YOY) to $361 million beating analyst estimates for $333.07 million. Gross merchandise value (GMV) grew 115% YoY to $4.5 billion.
Active merchants grew from 8,000 to 168,000 driven by adoption of Shop Pay Installments by merchants. Active consumers grew $150% to 11.2 million, up 29% sequentially.
Transactions per customer grew 15% to 2.5. Affirm CEO Max Levchin commented,
“We more than doubled gross merchandise volume year over year. Over the last 12 months, we have added nearly seven million active consumers to our network, while enabling 168,000 merchant partners to better serve their customers.
"Millions of people see Affirm as a smart way to pay because of our honest, transparent, and customizable payment terms. Merchants recognize our ability to help them drive growth and deliver the experience consumers are demanding at checkout.”
Mixed Guidance
Affirm issued inline guidance for fiscal Q3 2022 revenues of $325 million to $335 million versus $332.72 consensus analyst estimates. The Company sees GMV of $3.61 billion to $3.71 billion and adjusted operating loss as a percentage of revenues of (-21%) to (-19%).
The Company raised guidance for fiscal full-year 2022 revenues of $1.290 billion to $1.310 billion versus $1.28 billion consensus analyst estimates. Affirm expects fiscal full-year 2022 GMV of $14.58 billion to $14.78 billion and adjusted operating loss as a percentage of revenue (-14%) to (-12%).
Conference Call Takeaways
CEO Levchin reflected its decade long existence as a company and its goal of delivering “honest financial products to improve lives and to do so while delighting the people we get to serve every day.”
The Company has grown its customer base by 150% to over 11 million providing them a smarter way to pay. For the customer, Affirm is a safe and transparent method of paying for products over time while simultaneously being the ultimate marketing tool for sellers.
They enable sellers to incrementally grow sales without gimmicks. This has resulted in 20X growth of merchant customers. Affirm is a technology company that was started by engineers, and it continues to invest heavily in scalable technology.
It’s technology sets them apart as illustrated by big name merchant clients like Walmart (NYSE:WMT), Shopify, Target, and Amazon.
Affirm processed 1.6% of all U.S. online transactions for Black Friday, Cyber Monday along with triple digit YoY growth. In addition to BNPL, its technology has enabled a number of new products quickly to market including the Affirm SuperApp, Affirm Chrome Extension, adaptive checkouts, cash back rewards, and consumer-friendly crypto savings.
They announced the Visa partnership and launch of Debit+ which is currently on initial waitlist rollout. Although he warned not to give ‘crazy forecasting’ of its impact on the Company’s top and bottom line at scale, he did give some insight,
“On average, the number of weekly transactions by Debit+ consumer, excluding our own employees is greater than an order of magnitude above that of a regular Affirm user. Of course, these are enthusiastic early adopters, and we fully expect the number to normalize, but it's exciting to see first glimpses of what Affirm as a daily instrument might look like. We remain very excited about the future of this product and expect to talk a lot more about it this year.”
The Company continues to expand and lead the international BNPL effort through PayBright in Canada and launched in Australia. The Company accounts for 1% of U.S. e-commerce and continues to grow market share.
AFRM Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the playing field for AFRM stock. AFRM put in a bottom near the $26.29 Fibonacci (fib) level and staged a rally that peaked at $51.49 fib.
The weekly rifle chart has a stalled downtrend with a rising 5-period moving average (MA) and falling 15-period MA at $48.25. The weekly stochastic formed a bounce towards the 20-band to set-up a make or break.
The weekly 50-period MA sits at $81.39. The weekly market structure low (MSL) buy triggers on a breakout through $47.23.
The daily rifle chart breakdown formed as 5-period MA attempts to stall at $37.91 as 15-period MA stalls at $42.66 with 50-period MA at $43.06.
The daily lower Bollinger® Bands (BBs) sit at $32.83. The daily stochastic made a full oscillation that fell through the 20-band.
Prudent investors can look for opportunistic pullback levels at the $38.34 fib, $32.58 fib, $29.85, $26.29 fib, $22.57, and the $17.62 price levels. Upside trajectories range from the $48.00 fib up towards the $71.46 price level.