AFRM Jumps on Q4 Results Before Klarna Crashes the Party: Buy or Bail?

Core Viewpoint - Affirm Holdings, Inc. has experienced significant stock volatility following its fiscal Q4 2025 results, initially rising 10.6% but later declining 3.6% due to competitive pressures from Klarna's upcoming U.S. IPO [1][2] Group 1: Financial Performance - Affirm reported Q4 fiscal 2025 earnings of $0.20 per share, surpassing the Zacks Consensus Estimate of $0.11 and improving from a loss of $0.14 in the prior year [3] - Revenue increased by 33% year-over-year to $876.4 million, exceeding the consensus estimate by 4.4% [3] - Gross Merchandise Value (GMV) reached $10.4 billion, a 43% increase from the previous year, and also surpassed the Zacks Consensus Estimate of $9.5 billion [4] Group 2: Growth Drivers - Repeat customers accounted for 95% of transactions in Q4, indicating strong brand loyalty and predictable revenue streams [4] - The demand for 0% APR plans surged by 93% year-over-year, representing 14% of GMV, which is a significant growth driver [5] - Affirm is expanding its operations into Western Europe through a partnership with Shopify, starting with France, Germany, and the Netherlands, which is expected to unlock substantial growth potential [6] Group 3: Future Outlook - The company anticipates GMV for fiscal 2026 to exceed $46 billion, up from $36.7 billion in the prior year, with revenues projected to be 8.4% of GMV [7] - Adjusted operating margin is expected to rise to over 26.1% in fiscal 2026, compared to 24.1% in fiscal 2025 [7] - The Zacks Consensus Estimate for fiscal 2026 earnings suggests a 427% year-over-year increase to $0.79 per share, with fiscal 2027 earnings expected to grow nearly 78.7% [9] Group 4: Competitive Landscape - Klarna's entry into the U.S. market and Walmart's switch from Affirm to Klarna highlight the intensifying competition in the BNPL space [18] - Affirm's long-term debt stood at $7.8 billion as of June 30, 2025, with a debt-to-capital ratio of 71.8%, significantly higher than the industry average of 13.7% [17] - Affirm's stock has increased by 40% year-to-date, outperforming major competitors like PayPal and Block, which have seen declines of 18.5% and 10.9%, respectively [11]