Stocks Analysis by ValueWalk (Dave Kovaleski) covering: Affirm Holdings Inc. Read ValueWalk (Dave Kovaleski)'s latest article on Investing.com
) stock has been on a tear this week, rising some 40% over the last couple of days alone since the fintech reported its fiscal fourth quarter
As a young, growing, but unprofitable company, higher rates made the cost of borrowing to invest in the company more expensive. But also, Affirm is not a bank, so it must use third party banks for its installment loans, and high interest rates make those loans more costly to obtain, raising its funding costs. Further, inflation and the higher interest rates caused consumers to spend less, which also hurt Affirm, as it makes money the more often its service is used.
The number of transactions on the Affirm network surged 42% year over year to 24.7 million and 15% over fiscal Q3. Further, transactions per active consumer continued to increase, reaching 4.9, with consumers transacting frequently making up approximately 40% of all Affirm transactions in Q4. Overall, it helped Affirm to move closer to profitability, as it had a net loss of $45 million in the quarter, or 14 cents per share, down from a net loss of $206 million in the same quarter a year ago. The results were far better than the 48 cents per share loss that analysts expected.In the letter to shareholders, Affirm CEO Max Levchin said the company plans to be profitable on a GAAP basis one year from now, in the fiscal fourth quarter of the coming fiscal year.
Affirm got a few modest price target upgrades after earnings, but its price target is still just $40, which is a few dollars per share below where it currently stands.
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