E-commerce exploded during the pandemic. Recent data shows that most consumers who adapted to make purchases online are continuing to do so even though many brick-and-mortar options have reopened. The insane uptick in online spending has given rise to an exciting take on consumer lending which means big potential for players in the space.
Buy now, pay later (BNPL) is a twist on installment-based consumer lending fueled by upended consumer credit markets. Firms in the space make money by charging merchants a fee to offer small point-of-sale loans that shoppers repay in interest-free installments, bypassing credit checks, empowering the customer with greater spending ability, which highly benefits the merchant.
A recent study said BNPL transactions will increase more than sixfold by 2025 to $685 billion in sales — at a compound annual growth rate of 13%. Like all tech-centric industries, BNPL is evolving quickly. Competition in the space means that not all firms currently riding the BNPL wave will make it to shore.
Today we’ll take a look at one of the most promising companies that offer exposure to the flourishing BNPL space.
Affirm (AFRM) made its debut onto public markets earlier this year in one of the most talked-about IPO’s in history. Affirm priced its shares above the target range at $49 a piece. The stock soared 95% to close its first day of trading at around $97 and continued to climb as investors piled into the fintech name despite a lofty valuation. The stock hit its high of $168 in early November and has since lost around 25%.
There is no question that AFRM had become overvalued. Its price-to-sales ratio had more than doubled from 20 at the end of June to nearly 45 at the end of October. As a testament to the stock’s perceived potential, investors continued to jump on board, willing to pay top dollar for the name. The good news for patient onlookers is that the P/S has pulled in and is closer to the historical range at around 28.
In its fiscal first quarter, revenue grew 55% year over year to $269 million, driven by an enormous increase in active merchants due to its adoption on Shopify’s platform, and a 124% increase in active customers to 8.7 million and an 84% increase in gross merchandise volume.
The company also increased its revenue outlook for the fiscal second quarter to $330 million from $320 million for the full fiscal year to $1.25 billion from $1.22 billion, implying a growth rate of 42% and prompting analysts to increase their forecasts. The current consensus among analysts is to Buy AFRM. There are 7 Buy ratings, 5 Hold ratings, and 1 Sell rating for the stock. A median 12-month price target of $175 represents a 37% increase from the last price.
Where to invest $1,000 right now...
Before you consider buying Affirm, you'll want to see this.
Investing legend, Keith Kohl just revealed his #1 stock for 2022...
And it's not Affirm.
Jeff Bezos, Peter Thiel, and the Rockefellers are betting a colossal nine figures on this tiny company that trades publicly for $5.
Keith say’s he thinks investors will be able to turn a small $50 stake into $150,000.
Find that to be extraordinary?
Click here to watch his presentation, and decide for yourself...
But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.
Click here to find out the name and ticker of Keith's #1 pick...
