Affirm Slumps After Losses Widen, Worse Than Expected By

© Reuters

By Dhirendra Tripathi

– Affirm Holdings stock (NASDAQ:AFRM) looks set to extend its losses of the previous session as its widening losses lend more weight to worries about the profitability horizon of ‘buy now, pay later’ platforms.

The stock traded 9% lower in premarket trading after losing more than a fifth of its value Thursday due to losses that were worse than expected.

Net loss in the second quarter rose six-fold to $160 million, owing to stock-based compensation to staff and an accounting entry to recognize a liability. The adjusted loss per share was 57 cents.

Gross merchandise value, a metric defining the value of all transactions done on an online platform, more than doubled to $4.5 billion in the second quarter. Active customers more than doubled and merchants also signed up at an unprecedented pace.

Transactions per customer rose but provisions for credit losses rose from the previous quarter. The results come at a time when rising interest rates are set to dampen consumer spending growth and raise the cost of capital for young and still unprofitable companies like Affirm.

Most fintech BNPLs don't charge interest, making their money on the difference between what they pay the merchant and what they recoup from the buyer. The natural limits imposed on that spread by competition limit BNPLs' ability to make higher provisions for credit risk, a potential weakness in a rising interest rate environment. BNPLs as a whole have been the subject of repeated criticism about their relatively 'light-touch' credit-checking.

The company raised its guidance, pegging this fiscal year's revenue at $1.3 billion at the midpoint of its guidance range. Third-quarter quarter revenue is seen between $325 million and $330 million.

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