Tuesday, November 28, 2023
HomeUncategorizedAffirm Holdings (AFRM) shares tumbled 18.5% Friday on poor forward guidance

Affirm Holdings (AFRM) shares tumbled 18.5% Friday on poor forward guidance

  • Confirmed a reported EPS GAAP loss of -$0.65, below consensus.
  • Fourth-quarter revenue beat estimates by $8.5 million.
  • 2022 revenue leveling off.

renew: In an unusual twist, Affirm’s shares fell more sharply during regular trading hours than the pre-market market. Usually, this price action reverses when it comes to poor earnings reports. Immediate bad news took the stock above support on the way down, and then buyers showed up in regular trading hours to limit the downside. AFRM stock fell 14% in after-hours, but Friday’s regular session brought it down 18.5% to $25.45. The market appears to be extremely unhappy with the low level of revenue growth the company expects in fiscal 2023 (the next four quarters). Wall Street had been forecasting average revenue of $1.9 billion in fiscal 2023, but during the fourth-quarter earnings call, Affirm’s management guided as low as $1.625 billion. RBC Capital cut its price target to $40 from $48. Jefferies and Wedbush both reiterated their underperform ratings.

Affirm Holdings (AFRM) Reports Fourth Quarter Loss Beating expectations, the company’s shares fell about 14% in after-hours trading. Shares in AFRM recovered little in premarket trading on Friday, as shares fell 12.7% to $27.27.

Affirm Holdings Income

The current CEO of the buy now pay later (BNPL) company founded by PayPal mafia alumni Max Levchin reported a fourth-quarter loss of -$0.65, 8 cents below the Wall Street consensus. Revenue of $364 million beat estimates by $8.5 million, but was roughly in line with the previous two quarters. Basically, Affirm has been adding a ton of new suppliers to its base, but that hasn’t translated into revenue growth. Revenue numbers were up 39% year over year but less than 3% sequentially.

Unfortunately, management believes this stagnant growth will continue into the first quarter of 2023. Revenue guidance is given at the midpoint of $355 million in the next quarter despite the previous consensus of $391 million. The company also said its adjusted operating loss would jump to 11% of revenue in the next quarter, instead of 8% in the fourth quarter. Guidance for fiscal 2023 is also well below Wall Street’s previous estimates.

Active merchants increased from 207,000 to 235,000 or 13.5% MoM, a substantial increase, and active consumers increased by 1.2 million MoM to 1400 Ten thousand.

Chief Financial Officer Michael Linford noted that rising interest rates are impacting profitability, but have had a positive impact on it. “Despite the higher interest rate environment, our financing costs increased by 24% year-on-year, which was in line with the 24% increase in investment loans held and well below the 53% increase in our entire platform portfolio,” Linford said. )

Slides from AFRM FQ4 ’23 Earnings Presentation

Confirmed holding stock forecast

As pre-market prices tend to fall, take a look at the daily chart below As can be seen, there is some support at $26. Hopefully, for anxious shareholders, it will stick. Otherwise, AFRM is expected to drop towards the $20 support from mid-July. The Moving Average Convergence Divergence (MACD) indicator has reversed, so expect AFRM stock to lack a quick rally in the near future. If anything, AFRM is definitely a long-term hold. Without much growth or profits, it’s hard to say how its strategy will work. It’s hard to be bullish until a close above $40.

AFRM Daily Chart

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