Affirm’s stock quintupled this year, beating all tech peers, on buy now, pay later boom
Drew Angerer / Getty Images
A year ago, there was little holiday cheer at Affirm. The point-of-sale lender was confronting rising interest rates, recession fears and weakening consumer spending. Affirm shares ended 2022 down 90%, wiping out billions of dollars in market value.
Affirm investors are wrapping up 2023 in a much different mood.
The stock skyrocketed 430% in 2023, as of Wednesday’s close, outperforming all other U.S. tech companies valued at $5 billion or more. The next-best performer was Coinbase, which shot up 423% largely because of bitcoin’s rebound.
With the Federal Reserve setting the stage for interest rate cuts in the year ahead and more retailers signing onto Affirm’s buy now, pay later offerings, or BNPL, fear of a doomsday scenario for the company has faded. Shares of Affirm got a big boost in November after the company inked an expanded partnership with Amazon, and BNPL purchases hit an all-time high on Cyber Monday.
“The expectation was the consumer was going to be toast, unemployment was going to pick up and higher interest rates would destroy everything, and the exact opposite has happened on all fronts,” said Tom Hayes, chairman at Great Hill Capital, which doesn’t have a position in the stock. “So that’s why you have a scenario where Affirm can start to perform.”
Created in 2012 by PayPal co-founder Max Levchin, Affirm is competing with companies including Klarna, Block’s Afterpay and Zip in the burgeoning BNPL market. Shoppers who choose to pay with a BNPL service split their purchase into four or more installments typically over a period of three months to a year, without accruing compounding interest. The lenders make money from interest payments and by charging merchants fees to offer their lending services.
Retailers benefit by giving consumers another option for purchasing a skateboard, watch or a gift for a family member, and one that can come with less sticker shock, resulting in fewer abandoned carts.
Affirm’s run-up
Affirm made its public market debut on the Nasdaq in January 2021, as the Covid-19 pandemic was driving a surge in adoption of BNPL services. Shoppers flush with stimulus checks used the small loans when buying clothes, electronics and Peloton exercise bikes, which at one point accounted for 30% of Affirm’s revenue. Online storefronts rushed to add BNPL as an option at checkout.
But by early 2022, Affirm’s share price had fallen more than 60% from its 2021 peak. The rest of the year was just as gloomy as soaring interest rates made it more expensive for Affirm to borrow money to fund installment loans. In February 2023, Affirm cut 19% of its workforce, and executives said macro headwinds and “negative consumer sentiment” would likely persist for the remainder of the fiscal year.
As it turns out, they were overly bearish.
Affirm shares started climbing higher in August after the company’s fiscal fourth-quarter earnings report. The company picked up new merchant deals in sectors beyond retail, such as travel, wireless, ticketing and health care. The stock has more than doubled in the fourth quarter, boosted by an announcement last week that Affirm would offer BNPL loans at Walmart‘s self-checkout kiosks.
Even with their dramatic bounce back, Affirm shares are about 70% below their high in November 2021.
Heading into 2024, BNPL lenders face cooling inflation and an optimistic interest rate environment.
Dan Dolev, managing director at Mizuho Securities, said Affirm is in a strong position to retain users. He pointed to new merchant deals and the expanding market for BNPL offerings in physical stores. Affirm says 16.9 million people have used its services, and the company counts more than 266,000 merchant partners.
Affirm is eyeing international expansion and has launched a debit card that lets customers pay upfront or in installments. Affirm announced at its investor day last month that it plans to introduce a spending account tied to its debit card that will allow for ATM access and direct deposit capability.
“The next year or two years are going to be something very different,” said Dolev, who has a buy rating on Affirm shares. “Now they’ve got the brand, and what are they going to do with it? They’re going to turn it into a full-fledged financial services firm.”
‘David against Goliath’
Hayes sees more cause for skepticism. He said Affirm faces an “uphill battle” competing with entrenched operators such as PayPal and Block, as well as credit card companies such as American Express, Citi and Chase that have jumped into installment loans.
“It’s David against Goliath, and Goliath is going to win,” Hayes said.
Hayes said Affirm is going down a similar path to online lender SoFi, trying to “have a thousand different projects, and say we’re as big as JPMorgan, but at the end of the day, it’s just simply not going to work.”
BNPL lenders also face heightened risk of users failing to make payments on time. A March report by the Consumer Financial Protection Bureau found BNPL users were on average more likely to have higher levels of credit card debt. BNPL borrowers also tend to have lower credit scores, the CFPB said, with an average score in the subprime range of 580 to 669.
The Affirm website home screen is displayed on a laptop in an arranged photograph taken in Little Falls, New Jersey, on Dec. 9, 2020.
Gabby Jones | Bloomberg | Getty Images
An Affirm spokesperson didn’t provide a comment for this story but pointed to past comments from company executives.
“As our network grows, our moats get deeper,” Levchin said at the company’s investor forum in November. “We get more data. We underwrite more transactions. We meet more people.”
Affirm’s defaults remain low by industry standards. Average delinquency rates for peers, such as LendingClub, SoFi, Upstart and OneMain Financial, increased from 5.7% to 6.3% between January and November, while Affirm’s delinquency rate fell from 2.8% to 2.6%, Jefferies analysts wrote in a report last month.
Affirm says it bases loan decisions on a variety of data points in addition to a user’s credit score.
“Our process involves looking at credit report data, but could also involve some Affirm-specific stuff, like what we know about the merchant and the thing they are about to sell you,” Levchin said in a release last year.
As BNPL adoption grows, regulators are keeping a close eye on the space. Last week, three U.S. senators penned a letter to the CFPB urging the agency to monitor the uptick in BNPL usage during the holidays, saying it could leave consumers overextended. The CFPB announced in September 2022 that it would subject BNPL to greater oversight, in line with credit card companies.
Wells Fargo issued a report earlier this month that described BNPL loans as “phantom debt” that may be lulling “consumers into a false security in which many small payments add up to one big problem.” As it stands today, the industry is “not a major problem for consumer spending yet,” Wells Fargo economists Tim Quinlan and Shannon Seery Grein wrote.
Since BNPL loans are not currently reported to major credit reporting agencies, they wrote, there is “no way to know when this phantom debt could create substantial problems for the consumer and the broader economy.”
WATCH: Payments trends for 2024
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Technology
Here are the SpaceX employees who were elected to run Musk’s new company town of Starbase, Texas
The SpaceX Starship sits on a launch pad at Starbase near Boca Chica, Texas, on October 12, 2024, ahead of the Starship Flight 5 test. The test will involve the return of Starship’s Super Heavy Booster to the launch site.
Sergio Flores | Afp | Getty Images
Over the weekend, Elon Musk got his new company town along the Texas Gulf Coast. Controlling the city are three SpaceX employees, who all ran unopposed.
As NBC News reported, the election determining incorporation of the city of Starbase concluded on Saturday night, with 212 votes in favor and only six against. Just 143 votes were needed for the measure to pass.
Starbase was victorious in becoming a type C city, which in Texas applies to a previously unincorporated city, town or village of between 201 and 4,999 inhabitants. The city includes the SpaceX launch facility and company-owned land covering a 1.6 square-mile area.
The mayor is 36-year-old Bobby Peden, who has spent more than 12 years working for SpaceX and is currently vice president for Texas test and launch operations. Prior to joining the rocket maker in 2013, Peden was a graduate research assistant at the University of Texas at Austin, according to his LinkedIn profile.
Starbase has two commissioners, both from the SpaceX employee ranks.
One is Jenna Petrzelka, 39, who was an operations engineering manager at SpaceX until July, and now identifies as a philanthropist, according to her application to be on the ballot. She’s married to Joe Petrzelka, a vice president of Starship engineering and almost 14-year veteran at SpaceX.
The other commissioner is Jordan Buss, 40, a senior director of environmental health and safety for SpaceX who joined the company in 2023.
Musk, who has assumed a central role in President Donald Trump’s administration responsible for slashing the size of the federal government, began acquiring land for SpaceX in Boca Chica, Texas, about a decade ago. The first integrated Starship vehicle launched from the site, known as Starbase, in April 2023, and exploded in mid-flight.
The U.S. Fish and Wildlife Service soon disclosed details about the aftermath of the explosion, including that a “3.5-acre fire started south of the pad site on Boca Chica State Park land,” following the test flight.
State and federal regulators have fined SpaceX for violations of the Clean Water Act, and said the company had repeatedly polluted waters in the Boca Chica area. Environmental advocates and indigenous groups have also sued both the Federal Aviation Administration and SpaceX over the company’s flight tests and launch activity in the area.
Those groups said in legal filings that SpaceX caused harm to local habitat and endangered species due to vehicle traffic, noise, heat, explosions and fragmentation caused by the company’s construction, rocket testing and launch practices.
A SpaceX spokesperson didn’t immediately respond to a request for comment.
In a post on X on Saturday, the account for StarbaseTX wrote, “Becoming a city will help us continue building the best community possible for the men and women building the future of humanity’s place in space.”
WATCH: SpaceX launches third test flight of massive Starship rocket
Hinge Health’s TrueMotion feature.
Courtesy: Hinge Health
Hinge Health on Monday updated its prospectus to include the results from its first quarter, which showed accelerating revenue growth over its fourth quarter.
The digital physical therapy startup filed to go public in March, but it has not shared a price range yet. Hinge said that revenue in its first quarter climbed 50% to $123.8 million, up from $82.7 million during the same period last year. Hinge reported $117.3 million in revenue during its fourth quarter, up 44% from the same period in 2023.
Hinge said its net income for the period was $17.1 million after taxes, up from a net loss of $26.5 million after taxes during the same period last year.
The company is attempting to go public at a time of extreme economic uncertainty and market volatility, spurred largely by President Donald Trump’s sweeping tariff policy. Several companies, including online lender Klarna and ticket marketplace StubHub, have delayed their long-awaited IPOs.
Hinge’s updated prospectus signals to investors that the company is planning to forge ahead.
While the company’s revenue jumped 50%, the cost of goods sold fell slightly. That allowed Hinge to lift its gross margin to 81% from 70% a year earlier and record an operating income of $13.1 million after losing $31. 4 million in the same period a year earlier.
Hinge uses software to help patients treat acute musculoskeletal injuries, chronic pain and carry out post-surgery rehabilitation remotely. Large employers cover the costs so their employees can access Hinge’s app-based virtual physical therapy, as well as its wearable electrical nerve stimulation device called Enso.
Daniel Perez, Hinge’s CEO, and Gabriel Mecklenburg, the company’s executive chairman, co-founded the company in 2014 after experiencing personal struggles with physical rehabilitation.
Correction: A previous version of this story incorrectly stated that Q1 2025 was the company’s first profitable quarter. Hinge was profitable previously.
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