Here’s why Affirm stock price is crashing and what next
Affirm (NASDAQ:AFRM) stock price slumped more than 10% on Wednesday as investors continued to worry about the Buy Now Pay Later (BNPL) industry. The stock fell to a low of $24.51, which was below May’s high of $31.18.
Why does Affirm fall?
Affirm is a leading BNPL player with a strong market share in the United States. The company has over 210,000 merchants on its platform and over 10 million users.
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Like other companies in the industry, Affirm extends credit to customers who buy from its merchants like Amazon and Peloton. He then takes a commission from the company and a lower interest rate. Also, unlike credit card companies, Affirm does not charge late fees. It also doesn’t check a person’s credit score, which makes it better for most people.
Therefore, as inflation soars, investors worry about missed payments even though delinquencies remain low. According to the WSJ, about 3.7% of outstanding loan dollars on its balance sheet were at least 30 days past due at the end of March. It was more than double what it was a year earlier.
Another investor concern is that interest rates should continue to rise. While higher rates are good for credit card companies like Chase and Citi, they’re bad for Affirm. This is because the other companies rely on cheap customer deposits while Affirm has to borrow.
In its most recent results, Affirm said its total revenue increased 54% to $355 million. Network revenue increased 29% while net interest income jumped 42%.
Affirm’s stock price is also struggling as competition in the industry increases. The company competes fiercely with companies like PayPal, AfterPay, Klarna, and Zip, among others. In May, Klarna announced that it would focus on profitability by making 10% layoffs.
Confirm stock price predictions
The four-hour chart shows that AFRM stock price has been trending lower. It fell to a low of $13.80 in May. It then saw a strong rally as investors focused on the company’s profits. However, it struggled to move above the descending trend line shown in black. It is also slightly below the 50-day moving average while the MACD moved above the neutral level.
The stock will likely resume its downtrend as the bears target the key support level at $20. A move above the downtrend will invalidate the bearish outlook.
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