Affirm Holdings Surpasses Expectations with Strong Q2 Results

Affirm Holdings (NASDAQ: AFRM), a financial technology firm specializing in buy now, pay later solutions, delivered impressive results in its second quarter of fiscal 2025. The company reported a revenue of $866 million and earnings of $0.23 per share, easily exceeding market forecasts that anticipated $807 million in revenue and a loss of $0.15 per share. Following this robust performance and guidance that met expectations, Affirm’s stock increased by 22% on February 7.

Stock Performance and Year-to-Date Returns

Since the start of 2024, AFRM stock has yielded 53% returns, outperforming the S&P 500 index, which has risen by 26%. This growth can be attributed to a rise in gross merchandise volume (GMV), affirming the company’s strong market position. Investors seeking stability in their returns might consider the High-Quality Portfolio, which boasts over 91% returns since its inception, surpassing the performance of the S&P 500.

Q2 Fiscal 2025 Financial Highlights

Affirm’s revenue of $866 million in Q2 marks a substantial 47% year-over-year growth, driven by notable success across its business sectors. The gain on sale of loans soared by 138% year-over-year, while network revenue grew by 33%. Additionally, interest income surged by 42%, and servicing income rose by 28%. The company’s GMV rose by 35% to reach $10.1 billion, indicating effective monetization strategies. Furthermore, Affirm saw a 19% increase in active consumers, now totaling 21 million, and a 22% increase in transactions per active user.

Comparative Analysis and Future Outlook

Affirm reported earnings of $0.23 per share in Q2, a positive turnaround from a loss of $0.54 per share in the same period last year. The company anticipates revenues of around $770 million for Q3, aligning with consensus estimates. While AFRM stock’s recent trend shows promise, it has experienced volatility in the past, with returns consistently fluctuating more than those of the S&P 500.

Volatility vs. Stability: The High-Quality Portfolio

In contrast, the Trefis High-Quality (HQ) Portfolio, comprised of 30 stocks, has maintained a more stable performance, outpacing the S&P 500 over the past four years. This portfolio provides better returns with less risk, making it an appealing option for cautious investors.

Valuation Insight and Potential Upside

Given the present uncertainty around economic factors like rate cuts and trade tensions, questions arise about whether AFRM will face challenges akin to those in 2021 and 2022. Currently, at $75, the stock trades at 8.5 times trailing revenues, slightly below its two-year average P/S ratio of 8.6. Given Affirm’s recent performance, analysts suggest a potential upward adjustment in its historical valuation multiple. A P/S ratio of 9.5, reflecting a 10% premium, indicates a price target of $84, suggesting a 12% upside from current levels.

Peer Comparisons and Market Insights

While AFRM appears poised for growth, it’s critical to assess Affirm Holdings’ performance against its peers. For comprehensive insights on industry comparisons, visit the Peer Comparisons.

[1] Returns as of 2/10/2025
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios

See all Trefis Price Estimates

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.