Will Affirm Stock Recover? AFRM Will Likely Slide More

Shares for fintech company Affirm (AFRM) have suffered a tremendous blow this year, far outpacing the broad market downturn. Loyal Affirm investors or swing traders seeking opportunity may want to know the outlook for Affirm stock. According to Wedbush Securities, the downside is still coming, and it’s likely to be substantial.

Here are the details on Affirm’s stock performance as of late, plus whether the buy-now-pay-later (BNPL) platform has a chance of succeeding in the long term on the public market.

Securities analyst firm Wedbush says BNPL company Affirm will see another 40-percent slide from market close on Tuesday, June 7. The stock closed on Tuesday at $24.35 per share, and Wedbush predicts that number will fall to just $15 per share.

What Wedbush sees in Affirm is largely red flags. David Chiaverini, an analyst at the firm, touted concerns over the company’s potential to accrue profit. “We’re concerned about Affirm’s path to [generally accepted accounting principles] profitability, increasing competition in the [BNPL] space, industry forecasts calling for slowing e-commerce sales (which drive Affirm’s gross merchandise volume, or GMV), and its ability to cover its cost of capital as funding costs increase.”

In short, Chiaverini thinks Affirm has lost its sparkle and the forecast doesn’t look as bright as it may have at one time.

Affirm is still a startup, even though it's a household name and helped propel the BNPL industry into what it is today. Max Levchin, a member of the so-called PayPal mafia, founded Affirm in 2012. He took the company public in January 2021 at a valuation of $11.9 billion. As of Wednesday, June 8, Affirm maintains a market capitalization of $6.79 billion. While market cap and enterprise value differ, it reflects a sharp drop in the public’s perception of Affirm’s value.

Affirm’s all-time stock price is down nearly 80 percent. Many of those losses have occurred YTD. While the stock is on a one-month upside to the tune of about 15 percent, it has yet to prove its viability from a longer time horizon.

Wedbush ultimately labeled Affirm an “underperform” stock, and this notice will only impact its current success further in the red.

Affirm stock’s struggle is multifaceted. For one, it’s a tech stock in a market that's currently scrutinizing tech enterprise and stock valuations. Plus, the U.S. is on the verge of a recession, some experts say. Chiaverini says, “A recession could lead to an increase in unemployment, which could have negative impacts on consumer demand and credit metrics.”

As the BNPL space evolves, more competition is emerging from the woodworks. Blue-chip company Apple Inc. (AAPL) has announced its own BNPL product that will likely be a major Affirm competitor.

In the long term, Affirm stock carries a decent amount of risk, particularly given the unpredictable economy. Investors should proceed diligently or prioritize options or futures put contracts that bet on lower stock prices. Buying the dip could also be beneficial, but it may be wise to wait for a lower entry point.