Affirm Holdings (AFRM, Financial) stock is surging today. The buy now, pay later specialist's share price jumped 34.2%, reaching $42.38. This significant price movement is driven by Affirm's recently published results for the fourth quarter of its last fiscal year, which ended June 30. The company reported sales and earnings that exceeded Wall Street's expectations and provided guidance that greatly surpassed market projections.
In fiscal Q4, Affirm posted a loss of $0.14 per share on revenue of $659.18 million. Analysts had expected a per-share loss of $0.44 on revenue of $653.8 million. Revenue increased 47.9% year over year, and the loss was substantially lower than anticipated.
The company's buy now, pay later platform demonstrated robust momentum. Gross merchandise volume (GMV) rose 31% to reach $7.2 billion, and the total number of transactions increased 42% to 24.7 million. The average number of transactions per active customer climbed to 4.9 in Q4, up from 4.6 in fiscal Q3.
For the first quarter of its current fiscal year, Affirm is projecting GMV of $7.1 billion to $7.4 billion. Management anticipates sales between $640 million and $670 million, surpassing the average analyst estimate of $625 million. The company also expects an adjusted operating income margin of 14% to 16% for the quarter.
For the full year, Affirm is guiding for an adjusted operating margin of 18.4% and expects to achieve profitability in fiscal Q4. Annual GMV is projected to exceed $33.5 billion, topping Wall Street forecasts. Additionally, the company anticipates that revenue as a percentage of GMV will be at least 10 basis points higher than the previous fiscal year.
From a valuation perspective, Affirm (AFRM, Financial) is currently trading at a price-to-book (P/B) ratio of 4.99. The company has a GF Value of $41.08, indicating that the stock is fairly valued. For more details, investors can check its GF Value page.
Despite the promising growth metrics, investors should note some financial concerns. Affirm has an Altman Z-score of 1.57, which places it in the distress zone, implying a possibility of bankruptcy within the next two years. Additionally, the company has a history of issuing new debt, with $4.4 billion issued over the past three years.
On the positive side, Affirm's Beneish M-Score of -2.91 suggests that the company is unlikely to be engaging in earnings manipulation. However, the company has never been profitable in the past three years, and there were three insider selling transactions in the last three months, with no insider buying.
Given these mixed signals, potential investors should weigh the company's robust revenue growth and future profitability prospects against its financial vulnerabilities.
