Affirm (AFRM) Receiving Plenty Of Approval From Investors Today After Impressive Q4 Report

2:45 pm Friday, September 10th, 2021

Less than two weeks after announcing a game-changing partnership with e-commerce giant Amazon (AMZN), buy now, pay later (BNPL) company Affirm (NASDAQ: AFRM) followed up that exciting news with spectacular 4Q21 results last night. Immediately jumping off the page is the 106% surge in the company’s gross merchandise volume (GMV) to $2.5 bln, accelerating from last quarter’s 83% jump. The upswing in GMV growth speaks to the building momentum for BNPL services among consumers, as well as to AFRM’s success in establishing lucrative partnerships with major retailers like Walmart (WMT), Dick’s Sporting Goods (DKS), and Williams-Sonoma (WSM).

Ever since AFRM went public in January, a common concern hanging over the company has been its lack of customer diversification. Specifically, connected fitness equipment maker Peloton (PTON) accounted for around 30% of AFRM’s total revenue at the time of its IPO. Given PTON’s recent struggles, including a major product recall for its Tread product and a general slowing in demand, this customer concentration risk seemingly became more problematic. Along with some profit-taking following the AMZN news, this issue may explain why shares dipped by ~7% from last week.

PTON’s slide did indeed have a significant impact. GMV rocketed higher by 178%, excluding PTON. However, what AFRM’s impressive results show is that it’s no longer heavily reliant on PTON’s popularity to drive strong growth, thanks to its new merchant partnerships.

In total, active merchants grew by an astounding 412% to 29,000. During the earnings conference call, CEO Max Levchin stated that AFRM is gaining traction in less expensive items while attracting a wider variety of merchants. In particular, he highlighted fashion and beauty and travel-related categories as areas of strength.

The focal point for investors is clearly on AFRM’s accelerating growth, which is overshadowing the company’s bottom-line performance. Due to substantial investments in Sales & Marketing (+1,145% yr/yr) and Technology and Data Analytics (+125%), adjusted operating income fell by 70% yr/yr to $14.2 mln. Investors can also expect AFRM to continue prioritizing growth initiatives over profits for the foreseeable future.

The main takeaway is that AFRM is emerging as a premier growth stock with plenty of runway for expansion in the quarters and years ahead.