Leading buy now, pay later (BNPL) solution provider Affirm Holdings, Inc. AFRM is set to report its second-quarter fiscal 2025 results on Feb. 6, 2025, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s bottom line is currently pegged at a loss of 21 cents per shareon revenues of $803.48 million.
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The fiscal second-quarter earnings estimate has deteriorated over the past month. The bottom-line projection indicates a massive year-over-year decline from a profit of 4 cents per share. However, the Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 35.9%.
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For the current year, the Zacks Consensus Estimate for Affirm’s revenues is pegged at $3.11 billion, implying a rise of 33.7% year over year. The consensus mark for current year EPS is pegged at a loss of 62 cents, implying an improvement of 62.9% on a year-over-year basis.
Affirmbeat the consensus estimate for earnings in three of the last four quarters and missed once, with the average surprise being 17.8%.
Affirm Holdings, Inc. Price and EPS Surprise
Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. Quote
Affirm’s Q2 Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Affirm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
AFRM has an Earnings ESP of -55.03% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s see how things have shaped up before the fiscal second-quarter earnings announcement.
Q2 Factors to Note for Affirm
Merchant network revenues are likely to have benefited from an expanding Gross Merchandise Volume (GMV). Also, the active merchants figure is expected to have witnessed a significant boost in the fiscal second quarter due to the company’s ability to strike deals with different businesses. The Zacks Consensus Estimate for merchant network revenues is pegged at $232.84 million, indicating a 23.6% rise from the prior-year quarter’s figure.
The consensus mark for fiscal second quarter GMV implies 27.6% growth from the prior-year quarter’s number. Management anticipates the metric to be in the range of $9.35-$9.75 billion.
An increase in the number of transactions conducted through the Affirm platform is likely to have boosted active merchants and consumers. The Zacks Consensus Estimate for active consumers indicates 15.3% year-over-year growth. Also, the consensus mark for transactions per active consumer suggests a 13.6% rise from the year-ago period.
An increase in the usage of Affirm’s virtual cards is expected to have driven card network revenues. The consensus mark for card network revenues indicates a 33.2% improvement from the year-ago quarter’s number.
Meanwhile, interest income is likely to have received an impetus from the increase in loans held for investment. The Zacks Consensus Estimate for interest income is pegged at $413.6 million, which implies a 43.4% year-over-year rise.
A growing off-balance sheet platform portfolio is likely to have contributed to servicing income rise. The consensus mark for servicing income is pegged at nearly $29 million, which indicates a 29% surge from the year-ago quarter.
However, the quarterly results are likely to have witnessed higher transaction costs. The company expects transaction costs to be in the range of $420-$440 million, which remains higher than the year-ago level of $349.3 million. In addition to this, operating expenses are likely to have witnessed an increase due to higher processing and servicing and funding costs, along with an increase in the provision for credit losses. This, in turn, is expected to have inflicted pressure on margins, making an earnings beat uncertain.
Affirm’s Price Performance Comparison
Affirm stock has exhibited an upward movement, gaining a notable percentage over the past year. It has jumped 44.2% compared with the industry’s growth of 26.8%. In comparison, PayPal Holdings, Inc. PYPL, which also has a major footprint in the BNPL space, grew 45.5% during this time. Visa Inc. V, which is a rather traditional credit and debit card solutions provider and a major footprint holder in the payments space, gained 25.5% in the past year. Meanwhile, AFRM stock has outperformed the S&P 500 significantly, which has increased 23.9%.
Price Performance – AFRM, PYPL, V, Industry & S&P 500
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Affirm’s Valuation
Now, let’s look at the value Affirm offers investors at current levels.
Despite the share price appreciation, the company’s valuation looks relatively cheap compared with the industry average. Currently, AFRM is trading at 7.55X forward 12-month sales, below the industry’s average of 9.85X. So, there’s more room to grow.
Image Source: Zacks Investment Research
How to Play Affirm Stock Now?
Affirm has expanded its operations in the U.K. and is poised for further expansion, leveraging its North American expertise and existing partnerships with companies already operating in Europe. Its no-late-fees policy and transparent, longer-term payment options could appeal to younger U.K. consumers, nearly a quarter of whom have faced BNPL-related late fees. By combining its consumer-friendly model with strong industry connections, Affirm has a competitive edge in this evolving market.
The company utilizes advanced AI and machine learning to provide flexible payment solutions for businesses of all sizes. Its innovative risk management and credit underwriting ensure high approval rates with low fraud.
As e-commerce and BNPL adoption grow, Affirm is well-positioned to meet demand with its expanding product suite. With increasing cash reserves and a goal of GAAP profitability by the fourth quarter of fiscal 2025, the company is capitalizing on key partnerships and consumer trends. Given its solid momentum and attractive valuation, investors may find Affirm stock a compelling buy now.
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