today is Aug 14, 2022

The buy now, pay later lender recently added a major new client.

What Happened

June was a good month for Affirm Holdings (NASDAQ:AFRM) as its stock price jumped 10.8% in the month, according to SP Global Market Intelligence. That beat both the SP 500 and the Nasdaq, which were up 2.3% and 5.5%, respectively, in June.

It has been a volatile few months for the fintech, which went public in January. Through the end of June, the stock is down about 30% since the Jan. 13 initial public offering (IPO).

A man explaining something to his coworker.

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So what

Affirm Holdings is a lender that allows retailers to offer installment-payment plans to consumers at the point-of-sale. It has been around since 2012 but is coming off its first quarter as a public company. In the quarter ended March 31, its fiscal third quarter, Affirm saw revenue increase 67% year over year to $231 million, driven by an 83% increase in gross merchandise volume (GMV), which is merchandise sold through its loans. However, it had an operating loss of $169 million in the period, up from a loss of $81 million a year ago, due mainly to costs associated with the IPO. On an adjusted basis, it had operating income of $4.9 million, up from a $71 million loss a year ago.

While Affirm took a hit when Peloton, its biggest partner, had a recall of its treadmills, the company added a major new partner in Shopify after a successful pilot program. Affirmʻs services are now available to some 10,000 merchants on Shopify, and that number is expected to grow. Overall, Affirm has more than doubled the number of merchants on its platform in a year and grew the number of active consumers by 60% to 5.4 million. Those numbers, and the Shopify deal, certainly helped boost its numbers in June.

Now what

It has been a rocky launch for Affirm from a stock-price standpoint, but the Shopify deal is huge and could set it apart in a very crowded marketplace. In its outlook for the fourth quarter, however, the company called for slight revenue and GMV declines due mainly to the effects of the Peloton recall. Also, the adjusted operating loss is expected to be in the $50 million to $55 million range.

Affirm will have continued growing pains in the near term, but it has great long-term potential and is a company to keep an eye on.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Affirm Holdings, Inc., Peloton Interactive, and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.