By
Godfrey Benjamin
February 26th, 2024
Despite suffering a market cap setback in its fiscal Q3 of 2023, fintech platform Affirm expects full-year revenue of $1.56 billion.
On Tuesday, May 9, Affirm Holdings Inc (NASDAQ: AFRM) reported its fiscal Q3 2023 earnings which showed a loss of 69 cents per share and a revenue deficit of $205.7 million. However, recorded earnings per share still topped the consensus estimate of 91 cents for the same period.
Affirm’s fiscal Q3 2023 report showed $381 million in revenue, also beating the $366.9 million analysts expected. Following the better-than-expected performance, the fintech firm projected revenue between $390 million and $415 million for fiscal Q4 2023. Furthermore, the San Francisco-headquartered company expects full-year revenue of up to $1.56 billion.
Although Affirm’s stock is up 27% year-to-date, the company’s shares traded wildly, tumbling 11% in Tuesday’s final trading minutes. Following its earnings report, AFRM tanked to $12.30, representing a 50% decline in the last 12 months. At the time of writing, in the pre-market, the stock is down 7.8% which means that it is trading at $11.34.
A triggering factor for the sustained descent is investor concern regarding the future of its business model. Several investors worry that Affirm’s buy now, pay later (BNPL) scheme would face increasing competition from established tech players such as Apple (NASDAQ: AAPL). In addition, questions arise about how the installment loan financial lender would fare amid a weakening economy and rising interest rate landscape.
Although Affirm’s losses for the latest quarter were lower than expected, the $205.7 million deficit was more than triple 2022’s setback. In the year-ago quarter, Affirm lost $54.7 million on $354.8 million in revenue.
Affirm Q3 2023 Performance Represents Grim Reality Compared to Pandemic-Era Success
During the pandemic, Affirm thrived as households with stimulus funds and an increased desire for online shopping drove the business’s bottom line higher. However, the fintech platform’s prospects have decreased since then, with fewer bulls jumping on board. In March, D.A. Davidson analyst Christopher Brendler analyzed Affirm’s stock and underscored his optimism by maintaining his ‘Buy’ rating. Brendler said AFRM still held an attraction for investors with its $20 price target. This is despite a wider-than-expected fiscal Q2 2023 loss and staff downsizing. Expressing his thoughts on Affirm’s perceived staying power at the time, the D.A. Davidson analyst wrote:
“Although the rising interest rates and higher defaults have pressured profitability, recent results suggest the industry is successfully adjusting by raising pricing and tightening credit.”
Meanwhile, Affirm chief executive officer Max Levchin echoed Brendler’s sentiments in an investor letter yesterday that read:
“We are in an endurance race. We have the will and the capacity to not just finish but win. Leaning into our foundational advantages of strong and nimble underwriting and scalable technology, we intend to grow responsibly.”
In addition to its anticipated fiscal Q4 2023 revenue of $415 million, Affirm also expects to record a gross merchandise volume of up to $5.35 billion. However, the company warned that its fourth-quarter loan delinquency would also increase. This development implies that revenue minus transaction costs as a percentage of gross merchandise volume could drop to 2.9% in fiscal Q4. The figure currently stands at 3.6% in the current quarter.