Why Affirm's 38% YTD Drop Could Be a Golden Opportunity for Investors

Shares of Affirm Holdings, Inc. AFRM have plunged 38.3% in the year-to-date period, underperforming the S&P 500’s 14.1% drop and the industry’s 7.1% slide. Even major digital payments service provider PayPal Holdings, Inc. PYPL lost 31.4% during this time. Established financial giants in credit and debit card solutions like Visa Inc. V and Mastercard Incorporated MA have only declined modestly, falling 1.2% and 7.8%, respectively.Price Performance – AFRM, PYPL, V, MA Industry & S&P 500 Image Source: Zacks Investment ResearchWhat’s Behind the Drop?Recession fears, inflation concerns and worries about consumer debt repayment spooked investors across the fintech space. AFRM took an extra hit when Klarna struck a BNPL deal with a Walmart-backed finance app, raising doubts about Affirm's market share and future growth. As a result, AFRM now trades nearly 54.5% below its 52-week high of $82.53.But this steep correction could be laying the groundwork for a comeback.Klarna IPO Delay: An Unexpected Win for AFRMAccording to a Wall Street Journal report, Klarna has paused its IPO plans amid the broader tech sell-off and tariff tensions. That is good news for Affirm. Without Klarna going public and raising fresh capital, AFRM faces less immediate competitive pressure in the BNPL space. And with Klarna out of the investor spotlight, more attention could shift toward publicly traded options like Affirm.Also, Walmart’s switch is not as damaging as it seems. Per Affirm COO Michael Linford, Walmart accounts for only a small portion of its business. This helped the company to stay away from any “uneconomic” deal. Walmart represented just 5% of AFRM’s gross merchandise volume and 2% of adjusted operating income in the second half of last year.Why AFRM’s Long-Term Picture Still Looks BrightAffirm is expanding globally. After launching in Canada a few years ago, it entered the U.K. last November, aiming to use it as a launchpad for broader European expansion. Its BNPL major rival, PayPal, has a massive presence in Europe. With AFRM’s global partners already active in the region, this expansion could be smoother and faster.Affirm is also looking beyond BNPL. It is developing debit products and exploring banking integrations to make its services part of customers’ everyday spending, whether it is big-ticket items or daily purchases. This strategy will diversify its revenues and expand its addressable market size. This will also better equip the company to compete with major established entities like Visa and Mastercard. Affirm can build deeper relationships with consumers, personalize offerings and upsell new products.Importantly, AFRM is now focusing on sustainable growth rather than purely chasing expansion at any cost. It is tightening underwriting standards, optimizing operations and improving margins. This is essential for long-term investor confidence. It achieved the GAAP profitability mark in the last reported quarter and expects to sustain that feat from the fourth quarter of fiscal 2025.Favorable Earnings Estimates for AFRMThe Zacks Consensus Estimate for fiscal 2025 earnings indicates a 94% year-over-year improvement, while the estimate for fiscal 2026 earnings implies a surge of 704.3%. Moreover, the consensus mark for fiscal 2025 and 2026 revenues suggests 36.9% and 24% year-over-year growth, respectively.See the Zacks Earnings Calendar to stay ahead of market-making news.It has delivered solid financial results lately, beating earnings estimates in each of the trailing four quarters, the average surprise being 84.1%.Affirm Holdings, Inc. Price and EPS Surprise Affirm Holdings, Inc. price-eps-surprise | Affirm Holdings, Inc. QuoteAFRM’s ValuationIn terms of valuation, the company is cheaply priced compared with the industry average. Currently, AFRM is trading at 3.17X forward 12-month sales, below its three-year median of 3.50X and the industry’s average of 5.97X. So, there is more room to grow. Image Source: Zacks Investment ResearchIn comparison, PayPal, Visa and Mastercard are trading at P/S of 1.73X, 13.92X and 13.57X, respectively.Conclusion: Time to Consider Buying Affirm StockAffirm’s sharp decline may look discouraging on the surface, but it opens the door for a compelling entry point. With improving fundamentals, expanding international presence, product innovation beyond BNPL and a disciplined approach to profitability, the company is positioning itself for significant growth ahead.Its current valuation, combined with upbeat earnings expectations, makes it a strong candidate for investors seeking both value and future upside. Backed by a Zacks Rank #1 (Strong Buy), Affirm stands out as an attractive “buy-the-dip” opportunity in the fintech space at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.Want 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 Mastercard Incorporated (MA): Free Stock Analysis Report Visa Inc. (V): Free Stock Analysis Report PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report Affirm Holdings, Inc. (AFRM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks