Affirm Holdings (NASDAQ: AFRM), a financial technology company that offers services, such as buy now, pay later, and point-of-sale payment solutions, surpassed market expectations in its second quarter of fiscal 2025 (fiscal ends in June), reporting revenue of $866 million and earnings of $0.23 per share. These results significantly outperformed the street forecasts, which had projected revenue of $807 million and a loss of $0.15 per share. Following the solid Q2 beat and a guidance that met expectations, the company’s stock trended upward, surging 22% on February 7. Separately, BMY stock didn’t share the same fate as AFRM despite an earnings beat. Check out – Should You Pick Bristol Myers Squibb Stock At $57?
AFRM stock, with 53% returns since the beginning of 2024, has outperformed the S&P 500 index, up 26%. A rise in gross merchandise volume for Affirm has driven its stock price growth lately. But, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
Affirm Holdings’ revenue of $866 million in Q2 reflected a solid 47% y-o-y growth, driven by strong growth across business verticals. Affirm saw a 138% y-o-y growth in gain on sale of loans, a 33% jump in network revenue, a 42% surge in interest income, and a 28% rise in servicing income. Affirm’s key operating metrics – GMV – grew 35% y-o-y to $10.1 billion. This financial performance points toward improving monetization for the company. Furthermore, it also saw a 19% rise in active consumers to 21 million, and a 22% rise in the number of transactions per active user.
Affirm reported a profit of $0.23 per share in Q2, compared to a loss per share of $0.54 in the prior-year quarter. Looking forward, it expects its Q3 revenues to be around $770 million, at the mid-point of the provided range. This aligns with the consensus estimates.
Turning to AFRM stock, it has experienced a significant upward move recently. However, this has been accompanied by considerable volatility. The changes in AFRM stock over the last few years have been far from consistent, with annual returns being considerably more volatile than the S&P 500.
In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and ongoing trade wars, could AFRM face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months — or will it see higher levels? At its current levels of $75, AFRM stock is trading at 8.5x trailing revenues, marginally below the 8.6x average P/S ratio over the last two years. Based on Affirm’s recent strong performance, we believe an upward revision to its historical valuation multiple is warranted. Applying a P/S ratio of 9.5x, which represents a 10% premium to its historical average, suggests a price target of $84 – implying 12% potential upside from current levels. Separately, after a weak outlook, see What’s Next For FMC Stock?
While AFRM stock looks like it has some room for growth, it is helpful to see how Affirm Holdings’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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