Affirm shares drop 8% after earnings; Delinquencies flat
AInvestFriday, Feb 9, 2024 9:08 am ET
1min read
AFRM --

Affirm Holdings Inc. (AFRM) has presented its financial achievements for Q2 2024 with mixed reactions from the market. Despite recording a robust 48% increase in revenue year-over-year to $591 million, shares have declined by 8%. The company's Gross Merchandise Value (GMV) rose by 32% to $7.5 billion, continuing its growth streak for a third quarter, while Revenue Less Transaction Costs (RLTC) jumped by 68% to $242 million, constituting 3.2% of GMV and generating $93 million in Adjusted Operating Income. This performance signifies a substantial improvement from the $62 million reported in the same quarter of the previous year.

Affirm anticipates that GMV for the Affirm Card and new user additions will soon align with typical seasonal variations, which may affect quarter-to-quarter GMV growth. Interest-bearing GMV traditionally accounts for about 90% of the Affirm Card's total GMV, with the remainder split between Pay Now and Pay in 4 transactions. RLTC as a percentage of GMV aligns with the company's overall metrics and remains within the 3 to 4% long-term target range. Credit conditions remain stable, with flat delinquencies and ongoing improvements in credit performance, attributed to effective transaction-level underwriting. This has allowed the company to maintain differentiated credit offerings and achieve its economic goals. As Affirm's credit performance is expected to return to pre-pandemic norms, with lower delinquency rates anticipated in the second and third fiscal quarters, the company remains positioned for sustained growth and solid returns to investors.

While the share price has seen a downturn post-earnings report, it's important to note that the stock had a notable rally of 10% during the session prior to the announcement. Despite the drop, the underlying financials indicate strong performance, though it appears that market expectations were set higher. The stock, with a float of 224 million and a notable 17% short interest, saw an attempt by short squeezers to influence trading activity, which doesn't seem to have had the intended impact. In summary, Affirm's Q2 2024 results reflect a company that continues to grow and deliver, with a strong financial standing that promises an interesting trajectory in upcoming quarters.

$AFRM(AFRM)

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