Affirm shares dropped sharply on Friday after the fintech company released a weaker-than-expected revenue forecast and investors expressed concern over its increasing emphasis on 0% interest loans. The company expects revenue for the current quarter to fall between $815 million and $845 million. The midpoint of this range comes in below the $841 million average estimate from analysts, sparking investor unease.
CEO Max Levchin, who founded Affirm in 2012, is advocating a long-term growth strategy that focuses on offering 0% APR loans. He believes this approach can attract more consumers and eventually foster long-lasting loyalty, even if it leads to margin compression in the short term. Levchin argued that Affirm is presenting a compelling alternative to traditional credit cards by helping consumers avoid excessive revolving interest charges.
Currently, 0% interest loans represent about 13% of Affirm’s total Gross Merchandise Volume (GMV), with most of these loans—around 80%—going to prime and super-prime customers. The company primarily offers point-of-sale installment loans for consumer purchases in categories like electronics, apparel, and sporting goods. While GMV exceeded analysts’ expectations for the quarter, revenue less transaction costs (RLTC) came in below forecasts due to the increased share of no-interest financing.
Despite the headline earnings beat and revenue in line with expectations, the weaker RLTC metric disappointed some investors. Analysts from Citizens maintained an outperform rating but noted that the higher proportion of 0% loans contributed to a lower take rate and reduced margins. BTIG analysts, who also rate the stock a buy, pointed out that GMV growth wasn’t sufficient to offset the RLTC shortfall.
Levchin remains optimistic about consumer behavior, highlighting that even amid broader economic uncertainty, spending remains strong and Affirm’s credit performance is steady. He noted that consumers are still paying their bills on time, especially those owed to Affirm.
With the stock now down approximately 22% year-to-date, compared to a 7% decline for the Nasdaq, some analysts remain confident in Affirm’s long-term potential. Firms including Susquehanna, Bank of America, TD Cowen, and Goldman Sachs have either upgraded the stock or reaffirmed buy ratings, citing the company’s market position and growth trajectory. Barclays also maintained a positive outlook, pointing to strong partnerships such as Affirm’s new agreement with Costco.
READ MORE: