Affirm Stock is Ready for the Next Leg Higher

Buy now and pay later purchase financing provider Affirm NASDAQ: AFRM stock has been on a frenetic rally as its Amazon NASDAQ: AMZN partnership could be a gamechanger. The flexible payments provider is a leader in the buy-it-now and pay in installments category. The Amazon partnership will enable Affirm to provide flexible payment solutions for items priced at $50 or more. Customers can split the cost of the item into monthly payments. This can enhance sales for Amazon while bolstering Affirm’s revenues. Shares have been much volatility in the past few weeks on an indirect Apple NASDAQ: AAPL partnership and Shopify NASDAQ: SHOP buyout rumors. The buy now and pay later of payment processing is quickly becoming a strong tailwind and essential part of the post-pandemic “new normal” in addition to the work, entertain and interact from anywhere, connected fitness, streaming, and e-commerce. Prudent and risk-tolerant investors seeking exposure in the buy now and pay later segment can watch for opportunistic pullbacks in shares of Affirm.

CEO Comments from Q3 2021 Conference Call

Affirm Founder and CEO Max Levchin summed it up, “Affirm is a technology company, and we believe our technology is unparalleled among our competitors. We thrive on solving complex problems for both consumers and merchants that others can’t or won’t. The resulting technical expertise serves as an important competitive advantage. Leveraging our proprietary machine learning, we’re able to personalize offers for consumers, more efficiently proven price credit and manage risk in ways that achieve better credit outcomes. As a result, we’re able to offer more flexibility for consumers, allowing them to use Affirm across a range of price points and loan durations. These advantages differentiate us from buy now, pay later providers and other networks by allowing us to offer consumers much more than a short duration paid in for solution, which is critical in categories such as travel that have high transaction values. Our technology also enables us to drive measurable growth for our merchants. They see this in the volume of purchases we generate for them, increased conversion rates, higher average order values and incremental consumers. In fact, in the third quarter, approximately one-third of transactions were driven from Affirm’s app and site. Our ability to consistently deliver strong results for our merchants is why so many large enterprises, including Walmart and Priceline, choose to partner with Affirm.”

CFO Comments from Q3 2021 Conference Call

Affirm CFO Michael Linford commented, We continue to deliver on our strategy to grow our business while being very efficient with our equity capital. On the growth side, total platform portfolio, which includes the unpaid balance of all loans facilitated through our platform, including those loans held by third parties, grew from $2.4 billion as of March 31, 2020, to $4.2 billion at the end of the third quarter or $1.8 billion of year-to-year growth. This $1.8 billion in growth was funded by $1.3 billion in securitization volume and $552 million in forward flow volume while we were relatively flat year-on-year with the on-balance sheet we’re having. On the funding side, in our third quarter, we executed a 2021-A revolving securitization in addition to a new warehouse facility and new loan sale program. These deals allowed us to efficiently scale our program. Despite growing our loans in the balance sheet by $1.2 billion, we were able to reduce the equity capital required from the year-ago quarter by 10% from $229 million to $207 million. As a percentage of total platform portfolio, equity capital required fell to 5% from approximately 10% in the year ago quarter. Looking ahead, we are encouraged by the momentum in our business, and we believe the strengthening of the overall economy will serve as a tailwind in the fourth quarter. We are seeing GMV growth across all categories, particularly those hardest hit by the pandemic as demand recovers. We are also encouraged by the strong consumer and merchant adoption we saw in the third quarter.”

AFRM Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the playing field for AFRM stock. AFRM stock recently peaked off the $101.01 Fibonacci (fib) level after its Amazon partnership announcement. The weekly rifle chart is breaking out on the stochastic cross up. The big gap and grind has the rising weekly 5-period MA trying to catch up at the $72.22 fib with 15-period MA rising at $65.90. The weekly upper Bollinger Bands (BBs) are also trying to catch up at $87.75. The weekly stochastic is rising towards the 80-band. The gap surged through the daily market structure high (MSH) trigger at $70.23. The daily market structure low (MSL) buy triggered on the breakout above $54.61. The daily rifle chart is has a stochastic mini pup, but shares have fallen under the daily 5-period MA at $96.89 as the 15-period MA continues to rise at $76.75. The daily upper BBs sit at $109.09. A channel tightening may form is the daily 5-period MA caps the upside. This can provide opportunistic pullback levels at the $87.03 fib, $82.24 fib, $77.23 fib, $75.48 fib, $72.22 fib, $67.76 fib, $62.37 fib and the $59.52 daily MSH trigger level. Upside trajectories range from the $113.04 fib up to the $165.38 fib level.