Be cautious as inflation undermines users who buy now and pay later
High inflation has raised concerns among investors about the ability of borrowers to meet their monthly payments. Businesses that buy now and pay later are being watched closely because of how quickly they have grown during the pandemic.
In its fiscal fourth quarter earnings report, Affirm cited a small increase in delinquencies during the year. In an interview with The Associated Press, founder and CEO Max Levchin said the company is seeing “a certain level of stress” among customers with the lowest credit profiles.
“We’ve taken a much more conservative stance,” he said. But he noted that Affirm was looking at other ways to approve loans to borrowers, through tactics such as higher down payments.
There is also increased competition in the buy it now, pay later business. Tech giant Apple plans to roll out its own service later this year.
That said, merchants still sign up for Affirm, as do customers. The company has effectively doubled the number of merchants accepting Affirm payments over the past year, and the average number of transactions per customer has fallen from around two to three, a sign that customers aren’t just s sign up for the service once and exit it.
Affirm said it expects revenue for its current fiscal year of between $1.63 billion and $1.73 billion, compared to $1.9 billion in revenue sought by analysts, according to FactSet.
On a per-share basis, the San Francisco-based company said it incurred a loss of 65 cents in its fourth fiscal quarter that ended June 30.
Shares of Affirm Holdings Inc. have fallen 69% year-to-date.
This story was partially generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on AFRM at https://www.zacks.com/ap/AFRM.