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Earnings Results: Affirm stock plunges 14% as earnings beat but outlook comes up short

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Shares of Affirm Holdings Inc. tumbled nearly 14% in after-hours trading Thursday after the buy-now-pay-later company exceeded expectations with its latest results but delivered a lower-than-anticipated forecast that its chief financial officer described as prudent given macroeconomic uncertainty.

The company generated a fiscal fourth-quarter comprehensive loss of $201.2 million, or 65 cents a share, compared with a loss of $121.4 million, or 46 cents a share, in the year-prior period. The FactSet consensus was for a 58 cents-per-share loss on a GAAP basis.

Affirm’s
AFRM,
+3.31%

revenue rose to $364.1 million from $261.8 million, while analysts were looking for $355 million.

The company’s count of active merchants grew to 235,000 from 207,000 on a sequential basis, while its count of annual active consumers reached 14.0 million from 12.7 million in the March quarter.

“While the growth of online commerce is falling back to pre-COVID levels, the secular trend toward adopting honest financial products is gaining momentum,” Chief Executive Max Levchin said in a release.

On the call, he highlighted the largely short-term nature of Affirm financing.

“This part probably does not need to be said, but just because there still seems to be some confusion, unlike the folks in marketplace lending businesses, we’re not dealing with the decaying performance of loans made years ago in pursuit of growth at all cost,” Levchin said. “Roughly half of our outstanding loan book is expected to pay down with four months or so, and about 80% within eight months.”

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Gross merchandise volume (GMV) was $4.4 billion, up 77% from a year before, whereas analysts were modeling $4.1 billion.

For the fiscal first quarter, Affirm’s management expects GMV of $4.2 billion to $4.4 billion, along with revenue of $345 million to $365 million. The FactSet consensus was for $4.55 billion in GMV and $386 million in revenue.

Looking at the full fiscal year, Affirm executives model $20.5 billion to $22.0 billion in GMV and $1.625 billion to $1.725 billion in revenue. Analysts surveyed by FactSet were projecting $19.15 billion in GMV and $1.91 billion in revenue.

“In light of the uncertain macroeconomic backdrop, we are approaching our next fiscal year prudently while maintaining our focus on driving responsible growth and continuing to invest in strengthening our leadership position,” Chief Financial Officer Michael Linford said in a statement. “We continue to expect to achieve a sustained profitability run rate, on an adjusted operating income basis, by the end of fiscal 2023.”

Mizuho analyst Dan Dolev wrote that the “GMV [guidance] may simply prove conservative, and expect the decline in the stock to abate…and potentially even reverse course tomorrow.”

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Affirm shares have declined 69% so far this year as the S&P 500
SPX,
+1.41%

has fallen 12%.

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