Affirm is experiencing a significant increase in its share price, rising by as much as 26% during early trading on Friday. This surge follows the release of the buy now, pay later company’s fiscal fourth quarter results, which exceeded expectations. Additionally, Affirm provided optimistic guidance for the first quarter.

Strong Fourth Quarter Results:

• Loss per share: Affirm reported a loss per share of 69 cents, outperforming analyst expectations of 85 cents, according to Refinitiv.
• Revenue: Affirm generated $446 million in revenue, surpassing analyst expectations of $406 million, according to Refinitiv.

Affirm has also provided robust guidance for the fiscal first quarter, projecting a revenue range of $430 million to $455 million. Analysts had expected revenue of $430 million.

The company reported a gross merchandise volume (GMV) of $5.5 billion, representing a 25% increase compared to the previous year. This GMV exceeded analyst expectations of $5.3 billion. GMV is a widely used metric in the industry to measure the total value of transactions over a specific period.

After posting a net loss of $206 million, or 69 cents per share, in the year-ago quarter, Affirm’s financial performance has shown improvement. However, the buy now, pay later industry has been navigating challenges arising from a deteriorating economic environment and rising interest rates.

Affirm’s CFO, Michael Linford, stated, “Despite significant changes in interest rates and consumer demand, we still delivered good credit results, unit economics, and GMV growth. We also demonstrated that the business can continue to expand profitably even in a high interest rate environment.”

The company acknowledged in its earnings report that the resumption of student loan payments in October will have a modest negative impact on its fiscal 2024 GMV.

Positive Analyst Response:

Analysts responded positively to Affirm’s results. Deutsche Bank analysts raised their price target for the stock from $12 to $16 while maintaining a hold rating. They highlighted the growth of the Affirm Card, the company’s debit card, as a primary factor contributing to their optimistic outlook.

The analysts wrote, “While some uncertainty remains around how AFRM’s model will grow in the out years amid a cloudy macro, the company continues to show differentiated credit performance, and we see potential upside to numbers if the Affirm Card lives up to the lofty expectations mgmt. has set for it.”

Conclusion:

Affirm’s strong fourth quarter results and optimistic first quarter guidance have propelled its share price to a 26% increase. Despite facing challenges from an evolving economic environment and rising interest rates, Affirm has demonstrated resilience and growth. Additionally, analysts have expressed confidence in the company’s future potential.