Affirm Holdings rallies after Q1 earnings

Affirm Holdings (AFRM.US) is one of the best performing Wall Street companies today. Stock rallies more than 20% today, following the release of the fiscal Q3 2022 (calendar-Q1) earnings report yesterday after the close of the session. Company reported a narrower loss than expected, boosting hopes for achieving profitability in the coming fiscal year (calendar Q3 2022 - Q2 2023). Let's take a closer look at the earnings report of the company

Fiscal-Q3 results

Release of financial results for fiscal-Q3 from Affirm Holdings led to an over-30% bullish price gap at the start of today's Wall Street cash session and there are good reasons for such a strong performance of the company's stock. While the beat in revenue was relatively small, the company reported a big beat in result. Affirm Holdings reported a loss but this loss was much smaller than last year and around half of what the market expected. Gross Merchandise Volume almost reached $4 billion during the quarter with growth exceeded 70%. Number of active merchants skyrocketed and exceeded 200 thousand while the number of active consumers more than doubled.

Fiscal-Q3 2022 results (calendar Q1 2022)

• Revenue: $354.8 million vs $344 million expected (+54% YoY)

• Adjusted EPS: -$0.19 vs -$0.39 expected (-$1.06 a year ago)

• Gross Merchandise Volume: $3.9 billion vs $3.86 billion expected (+73% YoY)

• Active Merchants: 207k (+1,698% YoY)

• Active Consumers: 12.7 million (+137% YoY)

Executives address investors' concerns

There were some concerns over Affirm's business outlook in a scenario of an economic downturn. As Affirm provides consumer loans for "buy-now, pay-later" purchases, investors were worried that it may originate too many loans that consumers would be later unable to repay as economic conditions deteriorate. However, company's CEO said that the company pays a great deal of attention to loans it originates and purchases for which those loans are made. He said that as Affirm does not charge late fees for failing to repay loans on time, providing a loan for what seems to be a bad financial decision for consumers will also be a bad financial decision for the company. 

Affirm Holdings not afraid of economic downturn, guidance boosted

While the company is trying to screen for consumers that may fail to repay their loans during an economic downturn, it also sees an opportunity in such a downturn. Affirm services allow customers to purchase goods and make payment for them over time, what may prove to be a desired feature for consumers should economic conditions deteriorate. Solid results for fiscal-Q3 2022 encouraged the company to boost 2022 revenue outlook. Company now expects 2022 sales to reach $1.33-1.43 billion, up from previous guidance of $1.29-1.32 billion. Gross Merchandise Volume is also expected to be higher than previously anticipated - $15.04-15.14 billion instead of $14.58-14.78 billion. 

Affirm Holdings (AFRM.US) shares leaped higher at the start of today's trading with stock trading over 30% higher and testing $25-26 resistance zone. However, bulls failed to deliver a break above this resistance and a pullback began. However, it was short-lived as share price found support at the 50-hour moving average (green line). The aforementioned $25-26 zone is a near-term resistance to watch. Source: xStation5