Affirm Holdings (AFRM) is one of the hottest stocks on Friday after the buy now, pay later (BNPL) company reported a surprise profit and revenue beat for its fiscal 2025 second quarter.
In the three months ending December 31, Affirm's revenue increased 46.6% year over year to $866 million. It also swung to a net profit of 23 cents per share from a loss of 54 cents per share in the year-ago period.
"Contributing to this strong performance was another record-setting holiday shopping season as we once again delivered for our merchants, with several standout categories: during Black Friday/Cyber Monday, third-party marketplaces grew 44%, and travel 42%," said Affirm CEO Max Levchin in a statement.
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The results topped analysts' expectations. Wall Street was anticipating revenue of $807 million and a net loss of 15 cents per share, according to CNBC.
Affirm also said its gross merchandise volume (GMV) grew 34.7% year over year to $10.1 billion, topping analysts' expectations of $9.6 billion.
For its fiscal third quarter, Affirm said it expects to achieve revenue in the range of $755 million to $785 million. The midpoint of this range, $770 million, came up just short of the $772 million in revenue Wall Street is anticipating.
Affirm also provided a more detailed forecast for its full-year guidance. The company is calling for GMV in the range of $34.74 billion to $35.34 billion and revenue of $3.13 billion to $3.19 billion. This compares to its previous forecast for GMV of more than $34 billion and revenue that is at least 20 basis points higher than in 2024. (A basis point = 0.01%.)
"Affirm is in the strongest shape it's ever been," Levchin said. "Challenges met, competitors bested: excellent growth in a rapidly-expanding segment, on-target unit economics, robust operating leverage."
Is Affirm stock a buy, sell or hold?
Heading into Friday's session, Affirm Holdings was up more than 42% year over year, outpacing the S&P 500's total return (price change plus dividends) of 24.5%. Unsurprisingly, Wall Street is mostly bullish on the financial stock.
According to S&P Global Market Intelligence, the average analyst target price for AFRM stock is $70.79, representing implied upside of about 15% to its February 6 close. Additionally, the consensus recommendation is a Buy.
However, there are still a few holdouts to be found. Financial services firm Susquehanna, for one, has a Neutral rating (equivalent to a Hold) on the large-cap stock but raised its price target to $65 from $57 following the earnings release.
"AFRM results came in well ahead due to a variety of factors including unique partnerships, broad and growing adoption of their card, and increased popularity of their 0% APR product that rose 70%, all of which seemingly drove increased market share,” says Susquehanna analyst James Friedman.
Friedman adds that going forward, Affirm will see a variety of new growth thanks to "broadening merchant acceptance, a high-velocity funnel of new consumer accounts coming on file, and an attractive credit market.”
However, the share price has rallied too far, too fast, in Friedman's opinion and his Neutral rating is based on valuation.
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