Affirm Gains 42% Year to Date: Should You Buy Now or Hold the Stock?

Core Viewpoint - Affirm Holdings, Inc. has demonstrated strong performance in the buy-now-pay-later (BNPL) market, significantly outperforming industry benchmarks and showing potential for future growth through strategic partnerships and innovative technology [1][15]. Group 1: Financial Performance - Affirm's shares have increased by 42.3% year-to-date, compared to the industry's 22.3% growth and the broader Zacks Business Services sector's 21.8% rise [1]. - The company has a market capitalization of $22 billion [1]. - The Zacks Consensus Estimate for fiscal 2025 earnings indicates a 68.3% year-over-year improvement, while fiscal 2026 earnings are expected to increase by 206.9% [10]. Group 2: Business Model and Technology - Affirm utilizes advanced technology, including machine learning and artificial intelligence, to enhance payment experiences for consumers and merchants [4]. - The company's proprietary risk model allows for tailored financial products while maintaining low fraud levels and high approval rates [5]. - Affirm's business model benefits from network effects, with approximately 323,000 active merchants and$ 7.6 billion in gross merchandise volume during the first quarter of fiscal 2025 [6]. Group 3: Strategic Partnerships - Strategic alliances with major companies like Amazon and Apple Pay serve as growth catalysts, providing access to large consumer markets and diversifying revenue streams [7]. - Recent partnerships with JD Sports and Priceline aim to enhance pay-over-time solutions for their clients [7]. Group 4: Market Opportunities - The expanding BNPL market presents a significant opportunity for Affirm, as consumer preference shifts towards installment payment options [8]. - The company is well-positioned to capitalize on this trend, supported by strong cash reserves and cash flow generation [8]. Group 5: Competitive Landscape - Affirm operates in a highly competitive market, facing challenges from established digital payment solutions and other BNPL providers [12]. - The focus on technological advancement incurs significant expenditures, which may impact profitability [11]. Group 6: Valuation - Affirm is currently trading at 6.39X forward 12-month sales, below the industry average of 7.59X, indicating potential undervaluation [13].