Affirm Q2 Earnings Incoming: Time to Buy, Sell, or Hold the Stock?

Leading buy now, pay later (BNPL) solution provider Affirm Holdings, Inc. AFRM is set to report its second-quarter fiscal 2025 results on Feb. 6, 2025, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s bottom line is currently pegged at a loss of 21 cents per shareon revenues of $803.48 million.See the Zacks Earnings Calendar to stay ahead of market-making news.The fiscal second-quarter earnings estimate has deteriorated over the past month. The bottom-line projection indicates a massive year-over-year decline from a profit of 4 cents per share. However, the Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 35.9%. Image Source: Zacks Investment ResearchFor the current year, the Zacks Consensus Estimate for Affirm’s revenues is pegged at $3.11 billion, implying a rise of 33.7% year over year. The consensus mark for current year EPS is pegged at a loss of 62 cents, implying an improvement of 62.9% on a year-over-year basis.Affirmbeat the consensus estimate for earnings in three of the last four quarters and missed once, with the average surprise being 17.8%.Affirm Holdings, Inc. Price and EPS Surprise Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. QuoteAffirm’s Q2 Earnings WhispersOur proven model does not conclusively predict an earnings beat for Affirm this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.AFRM has an Earnings ESP of -55.03% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.You can see the complete list of today’s Zacks #1 Rank stocks here.Let’s see how things have shaped up before the fiscal second-quarter earnings announcement.Q2 Factors to Note for AffirmMerchant network revenues are likely to have benefited from an expanding Gross Merchandise Volume (GMV). Also, the active merchants figure is expected to have witnessed a significant boost in the fiscal second quarter due to the company’s ability to strike deals with different businesses. The Zacks Consensus Estimate for merchant network revenues is pegged at $232.84 million, indicating a 23.6% rise from the prior-year quarter’s figure. The consensus mark for fiscal second quarter GMV implies 27.6% growth from the prior-year quarter’s number. Management anticipates the metric to be in the range of $9.35-$9.75 billion.An increase in the number of transactions conducted through the Affirm platform is likely to have boosted active merchants and consumers. The Zacks Consensus Estimate for active consumers indicates 15.3% year-over-year growth. Also, the consensus mark for transactions per active consumer suggests a 13.6% rise from the year-ago period.An increase in the usage of Affirm’s virtual cards is expected to have driven card network revenues. The consensus mark for card network revenues indicates a 33.2% improvement from the year-ago quarter’s number.  Meanwhile, interest income is likely to have received an impetus from the increase in loans held for investment. The Zacks Consensus Estimate for interest income is pegged at $413.6 million, which implies a 43.4% year-over-year rise.A growing off-balance sheet platform portfolio is likely to have contributed to servicing income rise. The consensus mark for servicing income is pegged at nearly $29 million, which indicates a 29% surge from the year-ago quarter. However, the quarterly results are likely to have witnessed higher transaction costs. The company expects transaction costs to be in the range of $420-$440 million, which remains higher than the year-ago level of $349.3 million. In addition to this, operating expenses are likely to have witnessed an increase due to higher processing and servicing and funding costs, along with an increase in the provision for credit losses. This, in turn, is expected to have inflicted pressure on margins, making an earnings beat uncertain.Affirm’s Price Performance ComparisonAffirm stock has exhibited an upward movement, gaining a notable percentage over the past year. It has jumped 44.2% compared with the industry’s growth of 26.8%. In comparison, PayPal Holdings, Inc. PYPL, which also has a major footprint in the BNPL space, grew 45.5% during this time. Visa Inc. V, which is a rather traditional credit and debit card solutions provider and a major footprint holder in the payments space, gained 25.5% in the past year. Meanwhile, AFRM stock has outperformed the S&P 500 significantly, which has increased 23.9%.Price Performance – AFRM, PYPL, V, Industry & S&P 500 Image Source: Zacks Investment ResearchAffirm’s ValuationNow, let’s look at the value Affirm offers investors at current levels.Despite the share price appreciation, the company’s valuation looks relatively cheap compared with the industry average. Currently, AFRM is trading at 7.55X forward 12-month sales, below the industry’s average of 9.85X. So, there’s more room to grow. Image Source: Zacks Investment ResearchHow to Play Affirm Stock Now?Affirm has expanded its operations in the U.K. and is poised for further expansion, leveraging its North American expertise and existing partnerships with companies already operating in Europe. Its no-late-fees policy and transparent, longer-term payment options could appeal to younger U.K. consumers, nearly a quarter of whom have faced BNPL-related late fees. By combining its consumer-friendly model with strong industry connections, Affirm has a competitive edge in this evolving market.The company utilizes advanced AI and machine learning to provide flexible payment solutions for businesses of all sizes. Its innovative risk management and credit underwriting ensure high approval rates with low fraud.As e-commerce and BNPL adoption grow, Affirm is well-positioned to meet demand with its expanding product suite. With increasing cash reserves and a goal of GAAP profitability by the fourth quarter of fiscal 2025, the company is capitalizing on key partnerships and consumer trends. Given its solid momentum and attractive valuation, investors may find Affirm stock a compelling buy now.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Visa Inc. (V): Free Stock Analysis Report PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report Affirm Holdings, Inc. (AFRM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks