Why Affirm Shares Are Down Today

ByRichard C. Sloan

Jan 4, 2022

What happened

Lender Shares Buy Now, Pay Later (BNPL) To assert (NASDAQ: AFRM) fell as much as 16% today before rebounding a bit in the last hour of trading when it was only down around 11%. There doesn’t seem to be any obvious reason behind the move.

So what

Despite its lack of profitability, just a few months ago, investors pushed the Affirm share to a market cap of over $ 40 billion. In August of last year, Affirm partnered with Amazon to deliver its BNPL option at the cash register.

Image source: Getty Images.

But the magic began to wear off for all fintech stocks with premium valuations after the Federal Reserve accelerated the cut to its bond buying program and indicated that it may raise rates. interest several times this year.

This seemed to scare investors off as higher rates lead to higher defaults on loans and can also lead to lower demand for loans. There had already been a lot of questions about credit quality in the BNPL space. Then the Consumer Financial Protection Burea (CFPB) recently requested data from several large BNPL firms, including Affirm.

Now what

There have been growing concerns in the BNPL space about credit quality, with more than a third of consumers who tried BNPL missing at least one payment in September. In addition, the credit bureaus are starting to include these plans in credit scores.

While Affirm has huge potential and there is no evidence BNPL is slowing down, I will sit on the sidelines for now with the company still trading at a high valuation amid a lot of uncertainty. .

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.