Shares of consumer financing firm Affirm Holdings crashed on Friday following its December-quarter earnings report. Investors mulled new guidance for AFRM stock, which now includes Amazon.com transactions.
AFRM stock fell 20.7% on Friday to close at 46.55 on the stock market today. Shares plunged 21.4% on Thursday. With Friday's loss, AFRM stock is down nearly 54% so far this year.
Affirm stock on Thursday released its fiscal second-quarter earnings report ahead of schedule. The company's fiscal second-quarter earnings were released on Business Wire at 2:48 p.m. ET, an hour and 12 minutes before the market close.
Due to an expanding e-commerce partnership with online giant Amazon, management hiked full-year fiscal 2022 revenue outlook. Affirm projected revenue in a range of $1.29 billion to $1.31 billion, including Amazon transactions.
But that was up only about 5% from earlier guidance, which called for revenue in a range of $1.225 billion to $1.250 billion.
AFRM Stock: Guidance Confusing?
At Bank of America, analyst Jason Kupferberg said AFRM stock issued confusing guidance.
"For fiscal Q3, revenue/GMV are being guided down 9%/18% quarter-over-quarter," he said in a report. "While AFRM raised its fiscal 2022 outlook (now includes Amazon) for GMV by 11% at the mid-point, the revenue outlook was raised just 5% and growth in transaction costs was raised 9%."
He added: "Therefore, the midpoint of revenue less transaction expenses (gross margin) guidance was left essentially flat at $590 million (vs. $587.5 million prior). Based on management commentary, these dynamics seem attributable to mix effects that are moving very rapidly, including large enterprise merchants (such as Amazon and Walmart), Shopify, and Peloton Interactive. Amazon and Walmart have low take rates and interest-bearing loans only, which have timing differences between revenue (interest income recognized ratably over the life of the loan) and transaction expenses (provisions are booked upfront when loans are issued)."
Deutsche Bank analyst Bryan Keane had a cautious view.
"AFRM conservatively raised 2022 guidance much lower than anticipated expecting a sequential decline into Q3 due to seasonality, Peloton and difficult comparisons (despite larger partnerships continuing to ramp)," he said in a report.
AFRM Stock: Wider Net Loss
Affirm reported a 57-cent per share loss using Generally Accepted Accounting Principles, or GAAP, for the three months ended Dec. 31. That compares with a 38-cent loss in the year-earlier period. Analysts had projected a loss of 32 cents per share.
San Francisco-based Affirm reported a net loss of $159.7 million compared with a $26.6 million loss in the year-earlier period. Affirm said it had an adjusted operating loss of $7.9 million vs. $3.1 million in adjusted operating income a year earlier.
Affirm said revenue climbed 77% to $361 million vs. estimates of $329.1 million. The company said gross merchandise volume came in at $4.5 billion, up 115%, vs. estimates at $3.73 billion.
Affirm stock is one of the biggest providers of buy now, pay later installment payment services. Under an expanded deal, Affirm will be the only provider of BNPL services to Amazon until January 2023. In addition, Affirm will be integrated into Amazon Pay's digital wallet in the U.S.
New Partners Offset Peloton Struggles?
Struggling fitness company Peloton has been a large customer. But Affirm also has forged partnerships with e-commerce firm Shopify and Walmart.
The initial public offering for AFRM stock in January 2021 raised $1.2 billion. Affirm gets most of its revenue from transaction fees paid by online retailers.
Buy now, pay later — or BNPL — services generally split interest-free payments into three or four equal installments over two months or less. However, Affirm stretches out some BNPL plans to as long as 60 months. In addition, Affirm gets more than one-third of its revenue from interest income paid by consumers.
At Morgan Stanley, analyst James Faucette maintains an overweight rating on Affirm stock.
Affirm Stock: Account Growth
"Accounts grew to 11.2 million during December quarter, more than the 10.4 million the street had forecast," he said in a report. "The December quarter saw a marked 15% increase in engagement to 2.5 transactions per user, up from 2.2 a year ago, even as the number of new customers grew substantially."
He added: "For some investors, the rapidly changing mix may be confusing. The bottom line is that right now an increasing proportion of Affirm's loans are currently moving towards interest-bearing, which has the impact of reducing near-term revenue vis-a-vis GMV, while increasing future revenue (via higher interest income)."
Heading into Affirm earnings, the stock had a Relative Strength Rating of 27 out of a best-possible 99, according to IBD Stock Checkup.
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