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Affirm Soars as Buy-Now-Pay-Later Trend Helps Beat Estimates

Economy17 minutes ago (Nov 11, 2021 15:22)

© Reuters.

By Dhirendra Tripathi – Affirm stock (NASDAQ:AFRM) surged 12.7% Thursday as momentum for “buy-now-pay-later” services led the company to boost its outlook for the year.

A bigger partnership with Amazon (NASDAQ:AMZN) was also lending strength to the stock. Affirm will now be embedded as a payment option in Amazon Pay’s digital wallet in the U.S.

The company now sees its annual revenue in the range of $1.22 billion to $1.25 million and expects gross merchandise value to be in the region of $13.26 billion. It had earlier pegged its current-year revenue to come between $1.16 billion and $1.19 billion and GMV to be $12.6 billion.

GMV is a common measure of the health and growth of an ecommerce site and represents the total value of goods and services sold on the platform.

The company expanded its network of active merchants to over 100,000, the adoption by merchants on Shopify’s platform driving this growth. Active consumers more than doubled. Transactions per active customer rose 8%.

Affirm rode the pandemic-fueled demand as consumers, short of cash, hunted for buy-now-pay-later or BNPL options.

The BNPL option has been the mainstay of credit card companies for decades. However, most fintech BNPLs don’t charge interest. Instead, they make their money on the difference between what they pay the merchant and what they subsequently recoup from the buyer. While the user-friendly model may juice sales for the merchant, concerns about the model have arisen due to the widespread lack of credit checks involved – despite the fact that the payments company is, effectively, providing credit.

Affirm’s GMV in the first quarter jumped 84%, to $2.7 billion. Total revenue rose 55%, to $269 million. Revenue, less transaction costs, more than doubled to $112 million.

The operating loss widened nearly five-times to $166 million owing to stock-based   compensation following the company’s January IPO as well as new investments in product and engineering talent and marketing.

Affirm Soars as Buy-Now-Pay-Later Trend Helps Beat Estimates

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