Affirm's stock falls after earnings, but analysts say not to sweat the outlook

By Emily Bary

CEO says company has 'done exactly what we said we would' despite doubts on Wall Street

Affirm Holdings Inc. shares ran up Thursday in the lead up to the company's earnings report, but they pulled back sharply once the results came out, even as the company beat expectations.

Shares of Affirm (AFRM) fell 12% in after-hours trading after soaring 10% during the regular session.

Mizuho analyst Dan Dolev called the extended-session selloff a "knee-jerk" reaction to an outlook he thought reflected "conservatism."

Namely, the buy-now-pay-later company upped its full-year forecast for gross merchandise volume to more than $25.25 billion, a $1 billion boost relative to the prior outlook. That could have disappointed investors seeing as Affirm's December-quarter volume of $7.5 billion beat internal expectations by $700 million at the midpoint.

Jefferies analyst John Hecht added that "expectations were high going into this print, but the strong beat and momentum lead us to believe the new guidance is also conservative, even when considering the increase in the outlook."

Mizuho's Dolev said he expected the stock to recover as results for the latest quarter came in "significantly better than expected."

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The BNPL company posted fiscal second-quarter revenue of $591 million, up from $400 million a year before and well above the FactSet consensus, which called for $521 million.

Revenue less transaction costs came in at $242 million, up 68% from a year before and equating to 3.2% of gross merchandise volume (GMV). That percentage was above the buy-side bogey of less than 3%, according to Dolev.

GMV increased 32% to $7.5 billion and saw its fastest growth rate in over a year.

"This time last year, we reiterated our commitment to building operating leverage without sacrificing credit performance, volume growth or innovation," Chief Executive Max Levchin said in the shareholder letter. "The market wasn't exactly convinced then, but 12 months later, we have done exactly what we said we would."

The company said that its credit quality was "strong" with 30-plus-day delinquencies for monthly installment loans flat both on a year-over-year and a sequential basis, even though GMV growth accelerated.

"We believe credit performance has largely returned to pre-pandemic trends," the company said in its shareholder letter. "This includes normal seasonality, which has historically led to seasonally lower delinquency rates during the second and third fiscal quarters and seasonally elevated delinquency rates in the first and fourth fiscal quarters."

Affirm roughly halved its December-quarter net loss, which came in at $166.9 million, or 54 cents a share, compared with $322.4 million, or $1.10 a share, a year before. Analysts were modeling a 72-cent loss per share.

For the March quarter, Affirm models $5.8 billion to $6.0 billion in gross merchandise volume, while analysts had been looking for nearly $5.8 billion.

The company also anticipates $205 million to $215 million in revenue less transaction costs.

-Emily Bary

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02-08-24 2007ET

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