Can This Macro Trend Save Affirm? ($AFRM)

Prevailing behavioral trends drive the market. As a result, many of LikeFolio’s biggest wins have been informed by our powerful macro-level insights.

One recent example: the meteoric rise of Affirm ($AFRM) and the point-of-sale loan industry at large.

Consumer mentions of using ‘Buy Now, Pay Later’ (BNPL) services at checkout surged in 2020 and have since continued to new highs, currently pacing +25% YoY on a 90-day moving average.

The growth of this trend, paired with incredibly strong company-level data, convinced us to go long AFRM near $70 per share last year.

Thanks in part to a landmark partnership with the eCommerce giant Amazon ($AMZN), AFRM stock went on to rise by more than +100% in the following 6 months.

It has since forfeited all those gains, with shares trading near $70 again.

The company is set to report earnings today after the bell…So, what’s next for Affirm?

A look at AFRM’s Purchase Intent Mentions provides two important insights:

1. Affirm just had its best quarter ever. During the 2022 holiday season (officially ‘2022 Q2’), consumer Demand rose to a record high: +41% QoQ and +102% YoY.

2. Consumer Demand growth is slowing. Affirm’s integration on Amazon helped drive a record increase in the reporting quarter, but the uptrend hasn’t continued. PI Mentions are on pace to decline -27% QoQ in the current quarter (ending 3/31). AFRM operates at a significant loss, a fact which has become a liability during the recent shift in sentiment towards unprofitable growth stocks — A slowdown in top-line growth could be critically damaging for AFRM shares in the near term.

Competitive analysis shows that Affirm’s near-term demand growth is lagging behind the industry.

Peers like Klarna and Afterpay demonstrate strong QoQ demand growth and a higher level of Consumer Happiness, a clear sign that Affirm is underperforming.