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Should I Invest in Affirm Stock?

Affirm’s recent partnership with Amazon makes it one of the strongest contenders in the BNPL loan marketplace. Read on to see if recent profit-taking and Affirm’s dependence on Peloton could impact its price in the longer term.

Affirm Holdings, Inc.
company nameAffirm Holdings, Inc.
sectorTechnology
industryInformation Technology Services
address650 California Street, San Francisco, CA, United States
countryUnited States
websitehttp://www.affirm.com

Affirm might be a good buy for short-term traders looking to take advantage of high volatility or long-term traders who want to test the waters of the buy now pay later (BNPL) space. 

However, Affirm’s reduced income from the now tainted company Peloton Interactive, along with more BNPL competitors entering the space, could spark a bearish trend. 

You might be wondering—is Affirm a good buy given that it already partnered with Amazon? And should you be worried about a price drop from traders taking profits because of it?

Read on for the answers to these questions and more.

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About Affirm

Affirm is a company that offers installment loans to online shoppers using a BNPL system. They work with thousands of stores, and you can choose to pay with Affirm at checkout. 

Upon entering some basic information about yourself, Affirm will automatically approve or deny you a loan. 

By using Affirm, consumers can select a payment schedule that works well for them, and they don’t have to worry about encountering hidden fees. Affirm also doesn’t charge fees for late payments. So, it’s a far more economical financing option than credit cards.

To date, people have made over 17 million purchases using Affirm. They have a diverse leadership team led by founder and CEO Max Levchin, who was the co-founder of PayPal

Their management team has a strong financial and technological background, led by members including Brooke Major-Reid and Libor Michalek.

Bull Case

There are many reasons why experts believe that Affirm’s stock price isn’t running out of steam yet. Below are the highlights.

  • The price in August 2021 rose from around $61 per share mid-month to around $100 towards the end of the month, with September seeing even more gains.
  • Its price is consistently closing above the 20-day moving average.
  • Options traders have been leaning towards calls instead of puts by a significant margin.
  • Although AFRM missed its earnings goal earlier this year and dipped into the mid-$40s in May, it’s more than doubled in price since then.
  • In August 2021, Amazon announced its partnership with Affirm. It will roll out Affirm’s service over the next few months.
  • Affirm doesn’t charge companies a swipe fee, so it’s an attractive business to partner with since they can typically save 1.3 – 3.5% per transaction.
  • AFRM had a break-up at the top trend line at $127.79, indicating bullish sentiment. 

The close above Affirm’s 20-day moving average suggests that traders feel confident that the company will have a positive third-quarter earnings report. 

When there are more calls than puts in options trading, it signifies that traders feel more bullish. Therefore, it isn’t unreasonable to assume that more money will soon flood into this stock.

The $127.79 stock price mark was a strong resistance point that traders had been keeping their eye on. However, it has since risen above this price point, giving bulls confidence that the price may continue increasing more over the next few months.

AFRM has been experiencing high volatility, making it feel like a riskier investment for longer-term traders. However, short-term traders can expect to profit from this stock’s price swings.

And if long-term traders have diamond hands, they might reap the rewards in the future.

Furthermore, Affirm’s business model goes against banks and credit card companies, which makes transactions more costly and time-consuming for businesses. Therefore, it’s natural to assume that services like Affirm will continue to gain traction.

Bear Case

Despite so much good news for Affirm, there are some reasons why you might not want to invest in this stock at all, or at least for the moment. They include:

  • Some traders have been taking profits as a result of an Amazon-inspired run-up.
  • Square and PayPal have embarked on their own BNPL endeavors, so bears believe that there’s less room for Affirm to grow.
  • One of Affirm’s biggest customers is Peloton Interactive, which lost more than a third of its value since December 2020.
  • AFRM is currently straddling the upper region of a large, strong short-term part of the chart, making it attractive for traders to take profits.

One of the biggest struggles that Affirm faces is that Peloton Interactive’s sales spiked because of the pandemic. It was an excellent partnership when the times were good, but Affirm and its investors can no longer depend on their revenue.

Peloton is a bike and treadmill manufacturer, so people have less of a need for at-home gym equipment as the world is reopening—or they’ve already made their purchase and won’t need new equipment for years.

Furthermore, Peloton had to recall some of its treadmill products because of 18 reports of the touch screen detaching and falling, which causes risk of injury. As a result of increased competition, Peloton has also lowered the cost of its products.

Affirm is also facing stronger competition with other BNPL services. Big names like Square and PayPal are already offering their own Affirm-like programs. 

If you’re a long-term investor, now is probably not the best time to enter Affirm. It’s had a large run-up due to its partnership with Amazon, and it’s also reaching a trend in the charts where many short-term traders will likely sell.

Affirm Competitors

SSquare, Inc.
$265.08
SymbolSQ
Price$265.08
Change$9.73
Change %3.81%
Volume$6,792,413.00
Marketcap122.01B
PYPLPayPal Holdings, Inc.
$243.21
SymbolPYPL
Price$243.21
Change$15.15
Change %5.86%
Volume$42,051,798.00
Marketcap285.78B

Final Verdict

Affirm was an initial leader in its marketplace, and its partnership with Amazon proves that companies continue to value its service despite growing competition in the BNPL space. 

However, its reliance on the currently declining company Peloton Interactive and people taking profits from the AFRM’s price increase due to its Amazon partnership may give it a bearish outlook—at least in the short term.

So, if you’re a short-term trader, consider taking advantage of AFRM’s current volatility. If you’re a long-term trader, continue doing your research and watch how the BNPL market evolves.

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