Affirm (AFRM): The high-flying finance IPO du jour
Matt Weller, CFA, CMT January 14, 2021 3:33 PM
AFRM should offer plenty of short-term trading opportunities in both directions over the next few weeks
Extending the recent trend of technology (or at least tech-adjacent) “unicorns” going public, Affirm (AFRM) held its IPO yesterday, and traders were quick to gobble up shares of the consumer lending company.
For those who aren’t familiar, Affirm offers point-of-sale financing for consumer retailers. The company’s biggest partner is another high-flying pandemic winner, connected fitness equipment maker Peloton (PTN). Affirm earns roughly 30% of its revenue providing financing for consumers purchasing Peloton equipment, but lately the company has been expanding with other partners including Walmart (WMT), Nordstrom (JWN), RealReal (REAL), Eddie Bauer, Expedia Group (EXPE), Eventbrite (EB), Bonobos, and Purple, among others. Affirm seeks to stand out from competing financing alternatives like credit cards by never charging late fees and allowing consumers to spread their purchases over longer periods with relatively low interest rates.
In terms of its valuation, the company issued 24.6 Class A shares at $49 yesterday, valuing the lender at $15B+. Not surprisingly, investor demand for the firm’s 90%+ revenue growth was voracious, and the stock now trades above $100/share as we go to press, or roughly a $30B valuation. Competing consumer payment services like Square (SQ) and PayPal Holdings (PYPL) trade at roughly 10X revenues, but aren’t growing nearly as quickly as Affirm, which did over $500M in revenue over the last year. Put another way, if AFRM can continue to grow its revenue at a near-100% rate over the next 2-3 years, it could well grow into its lofty valuation.
In a 0% interest rate world where investors are obsessed with buying growth stocks at any price, AFRM should offer plenty of short-term trading opportunities in both directions over the next few weeks as bulls and bears battle to settle on an initial valuation for the exciting new company.
Source: TradingView, GAIN Capital
Learn more about equity trading opportunities.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.