What Affirm’s (AFRM) Blowout Quarter and Cautious CEO Say About the Consumer

On August 28, Affirm Holdings (AFRM) reported a fiscal fourth quarter that exceeded Wall Street's expectations, yet CEO Max Levchin warned of rising gas prices impacting shoppers. Revenue grew 33% to $1.17 billion, with gross merchandise volume (GMV) increasing 36% to $14.1 billion, both surpassing analyst estimates. Adjusted operating income hit $353 million, with a 30% margin, and the GAAP operating margin expanded to 12.6%.

Full-year GMV reached $50.2 billion, up from $36.7 billion, with active consumers increasing 21% to 27.8 million. CEO Levchin noted that US shoppers are feeling the impact of higher gas prices, which are standing at $4.09 a gallon as of August 28, a level not seen since March 2. While the company's credit quality improved, with the 30-day delinquency rate at 2.5%, Affirm's growth is tied to a consumer facing financial strain.

The stock's forward price-to-earnings ratio of 40.16 suggests investors are paying a premium for growth, but not to the extent that the stock is being aggressively chased. Affirm's growth is fueled by a market that sees value in its fundamentals but is cautious about the valuation.