Affirm Holdings (AFRM) saw its shares plunge more than 11.5% on Wednesday, hitting their lowest level since October 1. The stock is now down roughly 25% from its 2023 high, as a surprisingly strong inflation report pushed Treasury yields to multi-year highs.
Inflation Data Weighs on BNPL Stocks
The U.S. Labor Department reported that the headline Consumer Price Index (CPI) rose to 3.7% in September from 3.4% in August, while core inflation accelerated to 2.6%, exceeding analyst expectations. The 10-year Treasury yield climbed to 5.2%, and the 5-year yield reached 5.0%, pressuring growth-oriented stocks.
Other buy now, pay later (BNPL) names also retreated. Klarna dropped 2.8%, Sezzle fell over 6.3%, and Block, which owns AfterPay, declined more than 2.5%. The sector-wide selloff reflects the mixed impact of hot inflation on BNPL business models.
On one hand, higher prices can encourage consumers to use installment plans to manage cash flow, potentially boosting transaction volumes. On the other hand, rising inflation typically leads to higher default rates and increased funding costs. Affirm relies on various financing arrangements, including warehouse facilities, securitizations, and loan sales, making it particularly sensitive to interest rate movements.
Affirm's Fundamentals Remain Solid
Despite the market turbulence, Affirm's recent quarterly results showed robust growth. Gross merchandise volume (GMV) jumped 36% year-over-year to $14.1 billion, while revenue surged 33% to $1.2 billion. Active customers grew 21% to 27.8 million, and active merchants reached 571,000.
Delinquency rates have stayed relatively stable. The 30+ day delinquency rate held at 2.8% in the last fiscal year, with 60+ and 90+ day rates at 1.6% and 0.7%, respectively. Analysts project revenue for the latest quarter to rise 30% to $1.2 billion, with earnings per share improving from 61 cents to 86 cents.
Technical Outlook Points to $60
From a technical perspective, AFRM has fallen from an August high of $90 to the current $70 level. The stock has broken below the 38.2% Fibonacci retracement, the 50-day and 100-day exponential moving averages (EMAs), and the Ichimoku cloud indicator.
Given the bearish momentum, the next significant support level is the 61.8% Fibonacci retracement at $60. A move to that level would represent an additional decline of roughly 14% from current prices.
Investors will be watching whether the stock can stabilize at $60 or if further downside is in store, especially if inflation remains elevated and the Federal Reserve maintains its hawkish stance.
This article is for informational purposes only and does not constitute financial advice.
