Affirm Holdings Faces High Expectations for First-Quarter Earnings

Affirm Holdings, a prominent lender, is set to announce its fiscal first-quarter earnings after the market closes on Wednesday. While the company's stock has surged by over 100% this year, investors remain skeptical about its ability to navigate a challenging economic landscape. The stock is still trading nearly 90% below its peak two years ago when the pandemic brought in significant stimulus funds.

Of the 18 analysts surveyed by FactSet, only four have given Affirm shares a Buy rating. Eight analysts have a Hold rating, while six suggest selling the stock. The average price target of $16.53 represents a 21% decline from current levels.

According to FactSet data, Affirm is expected to report a 23% increase in first-quarter revenue to $444 million. Additionally, losses are predicted to decrease to $0.70 per share from $0.86 per share in the same quarter last year. Wall Street also forecasts that the company's active customer base will grow from 14.7 million to 18.5 million.

This earnings cycle holds significance beyond meeting expectations; Affirm must demonstrate to Wall Street that its business model, which focuses on offering interest-free or fee-free loans, can thrive in an environment of higher funding costs and financial strain among consumers.

Max Levchin, the CEO of Affirm, asserts that the company's strategy of providing short-term loans instead of revolving debt is advantageous during challenging economic cycles. Levchin explains that Affirm can adapt quickly by adjusting the types of loans it offers, allowing for more efficient use of capital.

Despite the uncertainties surrounding Affirm, the company remains confident in its ability to weather economic turbulence.