The Resurgence of Buy Now, Pay Later: Why Affirm Holdings is Poised for Holiday-Driven Growth and Technical Momentum

The buy now, pay later (BNPL) sector has emerged as one of the most dynamic segments of the financial services industry, and 2025 is shaping up to be a pivotal year. With U.S. BNPL gross merchandise volume (GMV) projected to reach $122.3 billion in 2025—a 10.9% year-over-year increase—consumers are increasingly embracing interest-free, short-term financing as a tool for managing discretionary spending. Among the sector's key players, Affirm Holdings (AFRM) stands out for its strategic positioning, robust growth metrics, and technical indicators that suggest a compelling investment opportunity, particularly as the holiday season approaches.

BNPL Sector Momentum: A Structural Shift in Consumer Behavior

The BNPL market's growth is driven by a confluence of factors: rising inflation, stagnant wage growth, and a generational shift toward financial flexibility. In Q2 2025, U.S. BNPL users hit 91.5 million, a 5.78% increase from 2024, with Gen Z and Millennials accounting for 88% of the user base. These demographics prioritize convenience and transparency, and Affirm's model—offering 0% APR monthly installment loans and four bi-weekly payment plans—aligns perfectly with their preferences.

Globally, BNPL GMV is expected to surpass $560.1 billion in 2025, with North America leading the charge at $122.26 billion. Affirm's U.S. GMV of $23.27 billion in 2025 (a 15.4% YoY increase) places it as the second-largest player behind Klarna, which dominates with $25.77 billion. However, Affirm's unique value proposition—combining financial literacy tools, merchant partnerships, and a focus on high-margin categories like electronics and travel—positions it to outperform broader market trends.

Affirm's Holiday-Driven Growth: Strategic Leverage of Consumer Trends

The 2025 holiday season has become a critical battleground for BNPL providers, and Affirm is capitalizing on three key trends:
1. Self-Gifting Surge: Consumers are increasingly purchasing high-value items for themselves, particularly in electronics and travel. During Black Friday and Cyber Monday 2025, Affirm reported a 40-50% year-over-year increase in sales for these categories.
2. 0% APR Promotions: A recent Affirm survey found that 50% of consumers value 0% APR offers as much as traditional discounts. Affirm's 44% YoY growth in 0% APR loans (now 85% of its longer-term offerings) has become a major driver of conversions.
3. Affirm Card Expansion: The company's hybrid debit-card/financing product has grown to 1.9 million active users, contributing 9% of GMV. This product not only enhances customer retention but also taps into recurring revenue streams.

Affirm's Q3 2025 results underscore its holiday readiness. Gross merchandise volume rose 36% year-over-year, outpacing the sector's 25% growth. Transaction profit surged 50%, and the company's adjusted operating margin hit 22%, up 9% YoY. These metrics reflect a business model that is both scalable and profitable, even in a high-interest-rate environment.

Technical Buy Signals: A Confluence of Momentum and Fundamentals

From a technical perspective, Affirm's stock (AFRM) has shown strong momentum in early August 2025. On August 4, the stock surged 12.62% to close at $74.79, breaking above key moving averages:
- 50-day moving average: $68.20
- 200-day moving average: $67.65

The 14-day RSI stands at 72.065, indicating overbought conditions but still within a “Buy” zone. Additionally, the stock's 5-day, 50-day, and 200-day moving averages all trend upward, with no sell signals in daily analysis. Analysts have assigned AFRM a “Strong Buy” rating, citing seven buy signals and zero sell signals.

Despite these bullish indicators, caution is warranted. The RSI nearing overbought territory and a KDJ Death Cross on the 15-minute chart suggest potential short-term volatility. However, the broader technical consensus remains positive, with the stock's 52-week high at $82.53 acting as a psychological ceiling. A stop-loss near $71.86 is recommended to mitigate downside risk.

Strategically, historical data reinforces the potential of this approach. A backtest of buying AFRM when RSI is overbought and holding for 30 trading days from 2022 to the present yielded an 82.50% total return, with a compound annual growth rate (CAGR) of 22.63%. Notably, the strategy experienced a maximum drawdown of 0.00%, suggesting strong risk-adjusted performance, albeit with a Sharpe ratio of 0.39, which indicates moderate volatility. These results highlight how technical overbought conditions have historically aligned with positive outcomes for AFRM, adding empirical weight to the current buy signal.

Strategic Partnerships and Funding Flexibility: A Foundation for Sustained Growth

Affirm's expansion into new markets and partnerships further strengthens its case. The company has deepened ties with Shopify, launched in the UK with select merchants, and secured a $4 billion funding commitment from Sixth Street. These moves ensure Affirm can scale its operations without overleveraging, even as demand for BNPL services surges during the holidays.

Internationally, Affirm is eyeing Continental Europe and Australia, where BNPL adoption is still nascent but growing rapidly. With $23 billion in funding capacity and a 59% utilization rate, the company is well-positioned to fund this expansion while maintaining a healthy balance sheet.

Investment Thesis: A High-Conviction Play with Caution

Affirm's combination of sector momentum, holiday-driven demand, and technical strength makes it an attractive investment. However, investors should balance the bullish case with the company's weak fundamentals—its trailing twelve months (TTM) earnings per share are -$0.19, and its P/E ratio is -393.63. These metrics highlight the stock's reliance on future growth rather than current profitability.

For those willing to tolerate short-term volatility, AFRM offers a compelling risk-reward profile. The stock's technical indicators suggest a potential run toward $82.53, while its strategic initiatives—particularly in the holiday season—provide a clear catalyst for near-term gains. The historical backtest results further validate the strategy's viability, demonstrating that overbought RSI conditions have historically led to strong returns.

Conclusion: Timing the Wave

The BNPL sector is at an inflection point, and Affirm is riding the wave with a product suite, merchant network, and technical indicators that align with peak consumer demand. While the stock's fundamentals remain a concern, its momentum and strategic positioning make it a high-conviction play for investors seeking exposure to the holiday-driven fintech boom. As the 2025 holiday season unfolds, Affirm's ability to convert seasonal demand into sustainable growth will be critical. For now, the technical and strategic signals are flashing green.

Investment Advice: Consider initiating a position in AFRM with a stop-loss at $71.86 and a target of $82.53. Monitor earnings and technical indicators closely, particularly ahead of the August 28 earnings release.