Fintech
Is this Fintech stock a buy on its partnership with Apple? — TradingView News
Affirm holdings AFRMthe buy now pay later (BNPL) service provider, can’t seem to catch a break in 2024. With the shares down 37.8% On an annual basis, Affirm has struggled with consistency delayed rate cut expectations.
This significantly underreported performance may be the reason for the company’s recently announced partnership with tech titan Apple 
But is this partnership with Apple enough to trigger a turnaround in Affirm shares? Shares have already filled the AAPL-related bullish gap, and despite Tuesday’s seemingly encouraging news that Apple was eliminating its BNPL service, Affirm said in its 8-K filing that the partnership will not “have a material impact on the come in.” or gross merchandise volume in fiscal year 2025.” 
So, what’s the benefit for investors here? Let’s dig deeper to understand.
Why does Affirm underperform?
Founded in 2012, Affirm provides a BNPL service for online and in-store purchases. They offer various consumer lending solutions, including point-of-sale loans and virtual cards. Affirm generates revenue through service fees charged to merchants and interest charged to consumers who choose to finance their purchases. It currently has a market capitalization of $9.55 billion.
In the fiscal third quarter of 2024, Affirm posted numbers that exceeded Street expectations. Net revenue for the quarter was $576.16 million, up 51.2% from a year earlier as the company’s core network revenue ($194.97 million, +31.3% on year-over-year) and interest income ($315.71 million, +77.1% year-over-year) both experienced substantial growth.
Quarterly losses narrowed to $0.43 per share from $0.69 per share a year earlier, beating the consensus estimate of a loss of $0.70 per share. Affirm’s losses have steadily narrowed over the past five quarters, even beating consensus estimates.
Key operating metrics all improved year-over-year in the third quarter, including gross merchandise value (GMV) of $6.3 billion; active customers, at 18.1 million; transactions per active customer, at 4.6 million; and active traders, at 292,300.
Additionally, Affirm reported positive cash flow from operating activities, with third-quarter net cash from operating activities of $208.15 million, reversing the outflow of $54.28 million a year ago. That said, even though the company exited the quarter with an improved cash balance of $1.62 billion, its much higher debt level of $6.41 billion is concerning.
In Q4 2024, Affirm expects GMV of $6.75-6.95 billion and revenue of $585-605 million. Analysts estimate the company’s future revenue growth at 26.59%, compared to the industry median of 5.15%.
What could push AFRM stock higher?
The BNPL business is expected to have healthy growth over the next few years, with the market expected to expand from its current size of $109 billion in 2024 to reach $171.6 billion by 2024, at a CAGR of 9, 5%.
As of the end of 2023, 82.1 million US consumers had used BNPL for their spending and borrowing needs, and that figure is expected to reach 112.7 million by 2027. During that period, volumes are expected to BNPL sales will grow from $71.9 billion to $124.8 billion, registering a CAGR of 14.8%.
As a leading player in this growing market, Affirm is well positioned to capitalize on this growth.
Another likely benefit for Affirm will be any rate cuts by the Federal Reserve. While persistently high interest rates have put pressure on growth-fueled lenders like Affirm, indications that the Fed is nearing its long-awaited policy turn should eventually remove some macro-level uncertainties that linger about stocks.
Positive strategic initiatives
In line with the rest of Apple’s artificial intelligence (AI)-powered announcements last week, Affirm has entered the AI megatrend. Affirm’s AI assistant is being developed and tested in the company’s customer support chat, where more than 60% of customers served did not require additional human assistance.
Additionally, the company remains on track to reach its $50 billion GMV goal, set last year with innovations like Purchasing Power and Adaptive Checkout aimed at improving checkout conversion and subscription capabilities based on customers’ financial preferences. consumers and reimbursement trends.
Finally, Affirm’s plans to expand internationally could drive future growth, as 60% of global e-commerce, excluding China, is outside of its core markets of the United States and Canada. Affirm’s next frontier is the UK, a huge $133 billion total addressable market. Here, their top 3 existing partners already boast a 20% penetration rate, translating into an estimated $26.6 billion potential market for Affirm once launched.
Furthermore, given the strong penetration of Affirm’s key partners across Europe, the UK may just be the beginning.
Analysts are divided on AFRM stock
Overall, analysts have a consensus rating of “Hold” for AFRM shares, with an average price target of $36.07. This indicates an upside potential of approximately 18.1% from current levels.
Of the 17 analysts covering the stock, 3 have a “Strong Buy” rating, 11 have a “Hold” rating, 1 has a “Moderate Sell” rating and 2 have a “Strong Sell” rating. 
Analysts remained firmly divided on AFRM following the Apple news, with Morgan Stanley 
As of the date of publication, Pathikrit Bose did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.