Affirm Holdings is a prominent player in the U.S. and Canadian "Buy Now, Pay Later" (BNPL) market, offering consumers flexible payment options and partnering with merchants to facilitate transactions. The company generates revenue through merchant fees, interest-bearing consumer transactions, interchange fees, and by providing loan services and portfolio management for third-party investors. As of June 30, 2024, Affirm reported over 18.7 million active consumers and a Gross Merchandise Volume (GMV) of approximately $26.6 billion, reflecting its significant presence in the BNPL sector. Affirm estimates the addressable market for its Affirm Card in the U.S. at 240 million consumers, with a short-term target market of 40 million. Overall, Affirm's diverse revenue streams and substantial consumer base underscore its influential role in the evolving BNPL landscape.
Affirm Holdings provides a commerce platform designed for digital and mobile retailers. Through its platform and partnerships with originating banks, Affirm enables consumers to pay for purchases over time, offering terms ranging from one to sixty months. The company employs a proprietary risk model to determine whether to provide a loan or offer a preferred repayment option. Affirm’s platform includes several key components: Point-of-Sale (POS) Payment Solution: Allows consumers to pay for purchases in fixed installments, offering APR payment options and interest-bearing loans. Merchant Commerce Solutions: Tools designed to enhance merchant offerings and customer engagement. Consumer-Focused Application: Enables users to manage payments, open savings accounts, and access a personalized marketplace.
The "Buy Now, Pay Later" (BNPL) segment represented only 3.8% of e-commerce payments in North America in 2021. However, it is growing faster than other categories in the payment market and is reshaping the global payment landscape, valued at approximately $10 trillion. According to Insider Intelligence, the BNPL market, estimated at $285 billion in 2018, is projected to grow to $680 billion globally by 2025, reflecting a compound annual growth rate (CAGR) of 13.2%. The main retail categories driving BNPL adoption include: General Merchandise: Accounts for 20% of total GMV. Fashion: 19% of GMV. Sporting Goods: 12% of GMV. Electronics: 12% of GMV. Home and Lifestyle: 11% of GMV. Travel: 11% of GMV. These insights are based on data from Affirm. The BNPL ecosystem comprises several types of players: Direct BNPL Providers: Companies offering BNPL solutions directly at the point of sale (POS), such as Affirm, Afterpay, and Klarna. Payment Facilitators: Entities like Mastercard, Shopify, and Stripe that integrate BNPL options into their platforms. Credit Card Providers: Traditional players, including American Express and Chase, that offer flexible post-purchase payment options. As BNPL continues to grow, it is increasingly becoming a significant component of the global payment market, offering both consumers and merchants flexible payment solutions.
- Affirm is a leader in the Buy Now, Pay Later (BNPL) category within the payment services sector, targeting a $10 trillion global payments market opportunity.
- The company addresses over 60% of U.S. e-commerce through strategic partnerships across various industry verticals.
- Affirm benefits from a two-sided network effect, where its growing base of consumers and merchants mutually reinforce each other's growth.
- Each individual transaction is underwritten before credit access is extended, ensuring robust risk management.
- Affirm develops and maintains its own proprietary credit rating system, leveraging AI and machine learning to enhance accuracy and decision-making.
- Affirm’s growth strategy is built on three pillars: - Scaling the Affirm Card: Expanding its presence and adoption among consumers. - Winning at Checkout: Strengthening its competitive edge as the preferred BNPL option. - Entering New Markets: Expanding its geographical and vertical reach.
- The BNPL segment faces high competition, with large retailers entering the market and offering their own BNPL solutions.
- Affirm is exposed to the challenges of rising interest rates and high inflation, which can increase funding costs and reduce consumer purchasing power.
- The company has a history of operating losses, raising concerns about its long-term profitability.
- Regulatory risks pose a significant challenge, as increased scrutiny and potential regulations could impact the BNPL business model.
- Affirm may face exposure to poor credit quality loans, particularly during adverse macroeconomic conditions, which could lead to higher defaults and financial strain.
- Affirm manages loan portfolios and is influenced by credit quality and interest rates, making it highly exposed to macroeconomic trends.
- The company’s ability to attract new consumers and merchants could be adversely affected by intense competition in the BNPL space.
- High inflation poses a challenge to Affirm’s business model by potentially reducing consumer spending and increasing operational costs.
- New loans issued by Affirm may carry higher interest rates, which could impact consumer adoption and affordability.
- The emergence of proprietary BNPL solutions from large retailers may result in a loss of market share for Affirm.
| Company | RIC | Market Capitalization, $mn | Last reporting year | P/E Fwd 1Y | P/E Fwd 2Y | EV/EBITDA 1Y fwd | EV/EBITDA 2Y fwd | EV/Revenues 1y fwd | EV/Revenues 2y fwd |
|---|---|---|---|---|---|---|---|---|---|
| Affirm Holdings Inc | AFRM.O | 22,223 | 2024-06-30 | 147.1 | 39.5 | 28.2 | 9.1 | 7.4 | |
| Marqeta Inc | MQ.O | 1,929 | 2023-12-31 | 142.9 | 34.0 | 17.7 | 1.6 | 1.4 | |
| Repay Holdings Corp | RPAY.OQ | 742 | 2023-12-31 | 8.5 | 8.1 | 7.7 | 7.3 | 3.4 | 3.2 |
| ACI Worldwide Inc | ACIW.O | 5,928 | 2023-12-31 | 36.0 | 27.8 | 15.2 | 14.1 | 4.2 | 4.0 |
| Paymentus Holdings Inc | PAY.N | 4,740 | 2023-12-31 | 77.8 | 64.7 | 50.0 | 39.7 | 5.4 | 4.4 |
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 265 | 478 | 781 | 1,349 | 1,588 | 2,323 | 3,093 | 3,803 | 4,688 |
| Growth | 80% | 63% | 73% | 18% | 46% | 33% | 23% | 23% | |
| EBITDA | -22 | 64 | -137 | -813 | -1,066 | -447 | 711 | 998 | 1,307 |
| EBITDA margin | -8.5% | 13.3% | -17.5% | -60.3% | -67.1% | -19.2% | 23.0% | 26.2% | 27.9% |
| Net income | -120 | -113 | -441 | -707 | -985 | -518 | -172 | 167 | 353 |
| Net margin | -45.5% | -23.6% | -56.5% | -52.4% | -62.1% | -22.3% | -5.6% | 4.4% | 7.5% |
| Net debt | 391 | 2,752 | 4,453 | 4,453 | 4,453 | 4,453 | 4,453 | ||
| MktCap | 18,141 | 4,865 | 4,405 | 4,405 | 4,405 | 4,405 | 4,405 |
Historical Multiples
| 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |
|---|---|---|---|---|---|---|---|
| EV/Revenue | 23.7 | 5.6 | 5.6 | 3.8 | 2.9 | 2.3 | 1.9 |
| EV/EBITDA | -135.5 | -9.4 | -8.3 | -19.8 | 12.5 | 8.9 | 6.8 |
| P/E | -41.1 | -6.9 | -4.5 | -8.5 | -25.6 | 26.5 | 12.5 |
