Affirm Swings Wildly Post Q3 Earnings: Is the Fintech Losing Steam?

Core Viewpoint - Affirm Holdings, Inc. has experienced significant stock volatility following its fiscal Q3 2025 earnings report, with a sharp decline in stock price due to disappointing fourth-quarter guidance, followed by a rebound after announcing a new partnership with World Market [1][2]. Financial Performance - Affirm reported fiscal Q3 2025 earnings of $0.01 per share, surpassing the Zacks Consensus Estimate of a loss of $0.09 and improving from a loss of $0.43 in the prior year [3]. - Revenue increased by 36% year-over-year to $783.1 million, aligning with the company's guidance range of $755–$785 million [3]. - Gross Merchandise Value (GMV) reached $8.6 billion, up 36% from the previous year, exceeding the Zacks Consensus Estimate of $8.1 billion [4]. - Transactions totaled 31.3 million, reflecting a 45.6% year-over-year increase, primarily driven by repeat customers [4]. Growth Prospects - The company anticipates Q4 revenue between $815-$845 million and GMV between $9.4-$9.7 billion, although this guidance fell short of Wall Street expectations [5]. - Repeat customer transactions accounted for 94% of total transactions in Q3, indicating strong brand loyalty and potential for more predictable revenue [6]. - Affirm is expanding internationally, with plans to enter Western Europe, starting with France, Germany, and the Netherlands, in partnership with Shopify [7]. Business Model and Innovations - Affirm's model benefits both merchants and consumers by reducing cart abandonment and offering flexible payment options, including 0% APR monthly installments, which rose 44% year-over-year and accounted for 13% of GMV [8]. - The company is investing in complementary financial products, such as debit solutions and business-to-business tools, to enhance customer relationships and usage frequency [9]. Earnings Estimates and Valuation - The Zacks Consensus Estimate suggests a 95.8% year-over-year improvement in fiscal 2025 earnings, with fiscal 2026 earnings expected to surge nearly 960% [10]. - Revenue projections for fiscal 2025 and 2026 are expected to grow by 36.9% and 23.3%, respectively [10]. - Affirm's stock has increased by 67% over the past year, outperforming the broader industry and the S&P 500 Index [11]. Competitive Landscape - Affirm is trading at a premium valuation of 4.47X forward 12-month sales, higher than its three-year median of 3.49X, while competitors PayPal and Block are trading at 2.09X and 1.39X, respectively [14]. - The BNPL market remains competitive, with traditional financial institutions and credit card companies entering the space, exemplified by Walmart's switch from Affirm to Klarna [18]. Conclusion - Affirm's fiscal Q3 performance showcased strong revenue growth and rising transaction volumes, particularly from loyal customers, alongside an expanding merchant network and international market push [19]. - However, challenges such as elevated debt levels, rising expenses, and intense competition may impact margin stability and market share expansion [19].