Should You Buy Affirm Stock Now?

April 22nd, 2025 by Trefis Team
AFRM: Affirm logo
AFRM
Affirm

Affirm Holdings (NASDAQ: AFRM), a financial technology company that offers services, such as buy now, pay later, and point-of-sale payment solutions, has seen its stock plunge nearly 30% this year. This downturn is largely driven by increasing concerns about the broader economic landscape. Specifically, President Trump’s tariffs on trading partners have amplified worries regarding potential adverse effects on the U.S. economy and consumer spending. This situation is being exacerbated by China’s stronger-than-expected retaliatory tariffs, contributing to an escalating global trade war and a subsequent downturn in global markets.

These macroeconomic headwinds pose several specific challenges for Affirm. Persistently high inflation could hinder the U.S. Federal Reserve from implementing further interest rate cuts, which would negatively affect Affirm’s lending business. Additionally, a potential economic recession would likely reduce demand for the company’s financial products.

Considering these factors, we maintain a negative outlook on Affirm’s stock, deeming it an unattractive investment at its current price of approximately $44 due to several key concerns and its seemingly high valuation. Our conclusion is based on a comparative analysis of AFRM’s current valuation against its recent operating performance, as well as its current and historical financial condition. Our assessment across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—indicates that Affirm exhibits a moderate operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does Affirm’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, AFRM stock looks slightly expensive compared to the broader market.

  • Affirm has a price-to-sales (P/S) ratio of 4.7 vs. a figure of 2.8 for the S&P 500
  • Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 16.7 compared to 17.6 for S&P 500

How Have Affirm’s Revenues Grown Over Recent Years?

Affirm’s Revenues have grown considerably over recent years.

  • Affirm has seen its top line grow at an average rate of 35.8% over the last 3 years (vs. increase of 6.2% for S&P 500)
  • Its revenues have grown 46.3% from $1.9 Bil to $2.8 Bil in the last 12 months (vs. growth of 5.3% for S&P 500)
  • Also, its quarterly revenues grew 46.6% to $866 Mil in the most recent quarter from $591 Mil a year ago (vs. 4.9% improvement for S&P 500)

How Profitable Is Affirm?

Affirm’s profit margins are much worse than most companies in the Trefis coverage universe.

  • Affirm’s Operating Income over the last four quarters was $31 Mil, which represents a very poor Operating Margin of 1.1% (vs. 13.1% for S&P 500)
  • Affirm’s Operating Cash Flow (OCF) over this period was $786 Mil, pointing to a high OCF Margin of 28.1% (vs. 15.7% for S&P 500)
  • For the last four-quarter period, Affirm’s Net Income was $-199 Mil – indicating a very poor Net Income Margin of -7.1% (vs. 11.3% for S&P 500)

Does Affirm Look Financially Stable?

Affirm’s balance sheet looks fine.

  • Affirm’s Debt figure was $7.5 Bil at the end of the most recent quarter, while its market capitalization is $13 Bil (as of 4/21/2025). This implies a poor Debt-to-Equity Ratio of 57.1% (vs. 21.5% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
  • Cash (including cash equivalents) makes up $1.9 Bil of the $10 Bil in Total Assets for Affirm.  This yields a strong Cash-to-Assets Ratio of 17.8% (vs. 15.0% for S&P 500)

How Resilient Is AFRM Stock During A Downturn?

AFRM stock has fared much worse than the benchmark S&P 500 index during the recent economic downturn in 2022. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

  • AFRM stock fell 90.6% from a high of $95.21 on 3 January 2022 to $8.91 on 27 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
  • The stock is yet to recover to its pre-Crisis high
  • The highest the stock has reached since then is $80.98 on 18 February 2025 and currently trades at around $44

Putting All The Pieces Together: What It Means For AFRM Stock

In summary, Affirm’s performance across the parameters detailed above are as follows:

  • Growth: Extremely Strong
  • Profitability: Very Weak
  • Financial Stability: Neutral
  • Downturn Resilience: Extremely Weak
  • Overall: Neutral

Even though Affirm’s performance across key fundamental factors appears moderate, we believe its current high valuation makes the stock an uncompelling investment at its present price. Moreover, the prevailing macroeconomic uncertainties, coupled with increasing recession risks and elevated interest rates, suggest that AFRM stock could experience further decline.

While you would do well to avoid AFRM stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

 

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