Will PGIM's $3B Facility Help Affirm Scale its BNPL Offerings Fast?

Core Insights - Affirm Holdings, Inc. has expanded its partnership with PGIM Fixed Income by establishing a new $3 billion revolving loan sale facility, allowing PGIM to purchase up to $500 million of Affirm's consumer loans at any time over a 36-month period [1][2][9] Group 1: Financial Stability and Scalability - The new facility enhances Affirm's financial stability and scalability, providing predictable access to capital to support loan growth and meet consumer demand [3][4] - This arrangement reflects growing confidence in Affirm's loan portfolio and secures a reliable funding source for its buy now, pay later (BNPL) offerings without frequent reliance on volatile public debt markets [2][3] Group 2: Impact on Cost of Capital - The deal improves Affirm's funding flexibility and may reduce its overall cost of capital by limiting reliance on more expensive public financing options [4][9] - The revolving structure caps loan exposure at any time, ensuring liquidity and operational efficiency, which strengthens Affirm's capital position [4][9] Group 3: Market Position and Competitors - PayPal and Block are expanding their presence in the BNPL space, with PayPal launching a new physical PayPal Credit Mastercard and Block integrating Afterpay services into Cash App [5][6] - Both companies are targeting seamless omnichannel experiences to capture the growing BNPL market, indicating a competitive landscape for Affirm [5][6] Group 4: Valuation and Earnings Estimates - Affirm trades at a forward price-to-sales ratio of 5.09X, which is lower than the industry average, and carries a Value Score of F [10] - The Zacks Consensus Estimate for Affirm's fiscal 2025 earnings implies a 100.6% improvement year over year, with significant growth projected for the following year [12][13]