Affirm stock price has done well in the past few months and is hovering near its highest point since February. After plunging to $30.9 in April, it has jumped by 150% as investors see it as a major beneficiary of the ongoing economic softness in the United States.
Affirm is benefiting as US inflation rises
A report released earlier this month showed that the US inflation and the unemployment rate were rising. Hiring has largely stalled, resulting in a 4.2% unemployment rate. At the same time, core inflation, which excludes the volatile food and energy prices, rose to 3.1%.
These tough economic times have led to a Buy Now, Pay Later boom in the United States. Companies like Affirm and Klarna are often seen as better shopping options because they don’t charge interest for their most basic shopping options.
The most recent results showed that Affirm was still in its growth phase. Its gross merchandise value jumped by 36% to $8.6 billion, leading to a revenue of $783 million, up by 36% from the same period last year.
The tough economic challenges saw the company add 1.8 million new customers to its platform.
Therefore, analysts believe that Affirm will publish strong numbers in the fourth fiscal quarter. The average estimate is that Affirm’s revenue rose to $837 million in the second quarter, a 27% annual increase. Chances are that the final figure will be much higher than what analysts estimate.
Analysts also expect the company to continue its profitable turn. The average estimate is that the earnings per share (EPS) will be 43 cents, a big increase from a loss of 14 cents per hour.
Historically, stocks react to the headline numbers after a company releases its results. However, these numbers are usually backward-looking, which explains why investors focus more on the guidance.
In Affirm’s case, analysts expect the management to guide towards a first quarter revenue figure of $858 million, up by 22% from last year.
Most importantly, the company is expected to experience annual growth rates of over 20% in the next few years, a good thing for a company that was started over a decade ago and one that operates in a highly competitive industry.
The other thing that will impact its stock price will be the trends in delinquencies, especially now that the economy is slowing.
The other risk is the view that the company is now fairly valued. Its current stock price is slightly higher than the average estimate by Wall Street analysts.
Affirm stock price analysis
AFRM stock chart | Source: TradingView
The AFRM stock price tends to have major swings whenever it releases its financial results, and it may happen on Thursday, too.
The daily chart shows that the AFRM stock price bottomed at $30 in April this year and has now surged by over 150%.
Its results come as it is nearing the important resistance level at $82.43, its highest level in February this year.
The stock has found a major barrier at the resistance point at $79.68, inside the ascending channel that connects the highest and lowest levels since June.
Therefore, the stock’s outlook is bullish as ling as bulls manage to push it above the resistance at $79.68. Such a move will lead to more gains, possibly to $82.43.
The alternative scenario is where the AFRM stock price retreats and retests the 50-day moving average at $63.
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