Affirm’s SWOT analysis: buy now, pay later stock faces growth and competition

Affirm Holdings, Inc. (NASDAQ:AFRM), a leading provider of Buy Now, Pay Later (BNPL) services with a market capitalization of $24.51 billion, has been making waves in the financial technology sector with its innovative approach to consumer lending. The company has demonstrated strong momentum, achieving impressive revenue growth of 38.8% over the last twelve months. As the company navigates a rapidly evolving market landscape, investors and analysts are closely watching its performance and future prospects.

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Company overview and recent performance

Affirm specializes in short-duration BNPL products, allowing consumers to make purchases and pay for them in installments. The company’s focus on transparent and flexible payment options has resonated with both consumers and merchants, leading to strong growth in recent years.

In its most recent financial results, Affirm demonstrated robust performance, with Gross Merchandise Volume (GMV) growing by 36% year-over-year. The company has achieved profitability in the last twelve months, with a gross profit margin of 46%. This growth has been driven by increased adoption of BNPL services and the company’s expanding partnerships with major retailers and technology companies.

Despite the strong GMV growth, Affirm has faced some challenges in terms of profitability. The company’s Revenue Less Transaction Costs (RLTC) margin has been impacted by a shift towards more 0% APR loans, which have lower margins compared to interest-bearing loans. This shift has been partly driven by merchant requests, rather than a proactive strategy by Affirm.

Strategic partnerships and expansion

One of Affirm’s key strengths lies in its strategic partnerships with major retailers and technology companies. The company has recently extended its partnership with Apple Pay, allowing users to utilize BNPL options directly in-store through their Apple Pay wallet. This integration is expected to significantly enhance Affirm’s growth potential by tapping into the large in-store commerce market, which is estimated to be over five times the size of e-commerce.

Affirm has also secured partnerships with other major retailers, including Mattress Firm and Costco. These collaborations not only expand Affirm’s reach but also demonstrate the company’s ability to compete effectively in the BNPL space.

Internationally, Affirm is expanding its presence through partnerships with companies like Adyen in the UK and JPMorgan Payments in the U.S. These expansions are expected to drive future growth and help Affirm capture a larger share of the global BNPL market.

Product offerings and market position

Affirm’s product portfolio includes a range of offerings designed to cater to different consumer needs. The Affirm Card, which has shown impressive growth with GMV increasing by 115% year-over-year, is becoming an increasingly important part of the company’s business. This product allows Affirm to compete more directly with traditional credit card companies while leveraging its BNPL expertise.

The company also offers both 0% APR and interest-bearing loans, providing flexibility to consumers and merchants. While the shift towards more 0% APR loans has impacted margins in the short term, it has helped Affirm maintain strong relationships with its merchant partners and attract price-sensitive consumers.

Credit performance and risk management

Affirm’s credit performance has remained stable, with delinquency rates showing resilience across most vintages. The company’s robust risk management platform has been a key factor in maintaining credit quality, even as it expands into new markets and product categories.

Analysts have noted that Affirm has not yet experienced a full credit cycle, which could pose potential risks. However, the company’s strong liquidity position, with a current ratio of 11.52, and its focus on short-duration loans and ability to adapt swiftly to changing macroeconomic conditions have been viewed positively by many observers. According to InvestingPro analysis, the company’s liquid assets significantly exceed its short-term obligations, providing a solid financial foundation.

Competitive landscape

The BNPL market has become increasingly competitive, with both established financial institutions and fintech startups vying for market share. Affirm faces competition from companies like Klarna, which recently secured a partnership with Walmart to power installment loans. This development has raised concerns among some investors about Affirm’s ability to maintain its growth trajectory.

However, Affirm’s differentiated approach, focusing on larger-ticket items and offering a range of loan options, has helped it carve out a strong position in the market. The company’s partnerships with major retailers and technology companies also provide a competitive advantage in terms of customer acquisition and retention.

Future outlook and growth prospects

Looking ahead, Affirm is well-positioned to benefit from several tailwinds in the BNPL industry, though investors should note its high P/E ratio of 490.52 and significant stock price volatility (Beta of 3.58). The continued growth of e-commerce and increasing adoption of BNPL services, particularly among younger demographics, are expected to drive demand for Affirm’s products.

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Analysts project mid-to-high 20% GMV growth for Affirm into FY28, driven by factors such as the expansion of its partnerships, international growth, and the continued success of the Affirm Card. The company is also expected to benefit from potential rate cuts, which could improve its margins on interest-bearing loans.

Bear Case

How might increased competition in the BNPL space affect Affirm’s market share?

The BNPL market has become increasingly crowded, with both established financial institutions and new fintech players entering the space. This heightened competition could potentially erode Affirm’s market share and put pressure on its margins.

Competitors like Klarna have secured significant partnerships, such as the recent deal with Walmart, which could limit Affirm’s growth opportunities with major retailers. Additionally, traditional credit card companies are also introducing their own BNPL offerings, leveraging their existing customer bases and financial resources to compete directly with Affirm.

As competition intensifies, Affirm may need to invest more heavily in marketing and customer acquisition, potentially impacting its profitability. The company might also face pressure to offer more competitive rates or terms to merchants and consumers, further squeezing its margins.

What risks does Affirm face from potential regulatory changes in the BNPL industry?

The BNPL industry has attracted increasing regulatory scrutiny as it has grown in popularity. Potential regulatory changes could pose significant risks to Affirm’s business model and operations.

Regulators may impose stricter credit checks or lending criteria, which could limit Affirm’s ability to approve loans quickly and easily. This could potentially slow down the company’s growth and make its services less attractive to both merchants and consumers.

There is also the possibility of new regulations around fee structures, interest rates, or consumer protection measures. Such changes could impact Affirm’s revenue streams or increase its compliance costs, potentially affecting its profitability and competitive position in the market.

Bull Case

How could Affirm’s partnerships with major retailers and tech companies drive future growth?

Affirm’s strategic partnerships with major retailers and technology companies position it well for future growth. The recent extension of its partnership with Apple Pay, allowing for in-store BNPL options, opens up a significant opportunity in the physical retail space, which is estimated to be over five times the size of e-commerce.

These partnerships not only expand Affirm’s reach but also enhance its credibility and brand recognition among consumers. As more consumers become familiar with Affirm through these high-profile partnerships, it could lead to increased adoption of its services across a broader range of merchants.

Furthermore, these partnerships often involve deep integration with the merchants’ systems, creating switching costs that can help Affirm maintain long-term relationships. This could provide a stable foundation for sustained growth and help defend against competitive pressures.

What potential benefits could Affirm see from expected rate cuts and economic conditions?

Anticipated rate cuts could have a positive impact on Affirm’s business model. Lower interest rates generally reduce the cost of funding for lenders, which could improve Affirm’s margins on its interest-bearing loans.

Additionally, in an environment of lower interest rates, consumers may be more inclined to finance purchases, potentially driving increased demand for BNPL services. This could lead to higher transaction volumes and GMV growth for Affirm.

Economic conditions that support consumer spending, such as low unemployment and wage growth, could also benefit Affirm by increasing the overall demand for its services. As consumers feel more financially secure, they may be more likely to make larger purchases using BNPL options, aligning well with Affirm’s focus on higher-ticket items.

SWOT Analysis

Strengths

• Strong partnerships with major retailers and tech companies
• Robust risk management platform
• Diversified product offerings (Affirm Card, 0% APR loans)
• Focus on transparency and consumer-friendly terms

Weaknesses

• Dependence on merchant partnerships for customer acquisition
• Lower margins on 0% APR loans
• Limited experience with full credit cycles

Opportunities

• Expansion into international markets
• Growth in e-commerce and BNPL adoption
• Potential benefits from rate cuts
• Increasing market share in larger ticket categories

Threats

• Increased competition in the BNPL space
• Potential regulatory changes
• Economic downturns affecting consumer spending and credit quality
• Dependency on key partnerships for growth

Analyst Targets

• BTIG: Neutral (October 6, 2025)
• Jefferies: Buy, $110 (September 24, 2025)
• Mizuho: Outperform, $108 (September 18, 2025)
• Evercore ISI: Outperform, $100 (September 16, 2025)
• Jefferies: Buy, $95 (August 26, 2025)
• Evercore ISI: Outperform, $67 (August 19, 2025)
• JMP Securities: Market Outperform, $75 (July 17, 2025)
• RBC Capital Markets: Sector Perform, $70 (May 30, 2025)
• JMP Securities: Market Outperform, $75 (May 21, 2025)
• Barclays: Overweight, $53 (May 12, 2025)
• RBC Capital Markets: Sector Perform, $70 (May 9, 2025)
• Morgan Stanley: Equal-weight, $60 (May 9, 2025)
• Barclays: Overweight, $45 (May 9, 2025)
• JMP Securities: Market Outperform, $75 (May 9, 2025)
• Morgan Stanley: Equal-weight, $60 (May 6, 2025)
• JMP Securities: Market Outperform, $85 (March 31, 2025)
• BMO Capital Markets: Outperform, $69 (March 20, 2025)
• Compass Point: Buy, $64 (March 19, 2025)

This analysis is based on information available up to October 8, 2025, and reflects the views and projections of various analysts and financial institutions as of that date.

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