Keep an eye on Affirm Holdings (AFRM).
At the moment, the stock is pushing higher on speculation it could also be acquired. All after Square announced it was buying its competitor Afterpay in an all-stock transaction worth $29 billion. All as “buy now, pay later (BNPL)” just begins to gain popularity.
In fact, according to Barron’s, “BNPL is gaining popularity given that interest rates are ultralow, reducing costs for consumers. Other fintech apps have entered the market, including Affirm, a pure play on the sector, and PayPal (PYPL). Apple (AAPL) is also developing a BNPL service with Goldman Sachs Group (GS), its credit-card partner.”
In the first two months of the new year, BNPL saw 215% year over year growth, as noted by Adobe. Even better, according to Bank of America, BNPL apps could grow 10-15x by 2025, and could eventually process $650 billion to $1 trillion in transactions. In addition, according to Yahoo Finance, “The trend is also part of a generational shift: The average user of buy now, pay later services is their 30s, BofA found, and the average amount spent was around $200 to $500 (as compared to $5,000 to $6,000 one would spend on a credit card).”
Affirm Holdings Posted Strong Earnings in May
Affirm Holdings is seeing solid growth.
- Gross merchandise volume for the third quarter of fiscal 2021 was $2.3 billion, an increase of 83%, or 100% excluding Peloton, year over year
- Active merchants more than doubled to nearly 12,000 from March 2020 to March 2021
- Active consumers grew 60% to 5.4 million from March 31, 2020 to March 31, 2021
- Transactions per active consumer were approximately 2.3 as of March 31, 2021, an increase of 10% when compared to March 31, 2020
- Total revenue was $230.7 million, a 67% increase when compared to the third quarter of fiscal 2020, driven primarily by increases in network revenue and interest income, related to growth in GMV and loans held for investment, respectively. Total revenue includes a $3.5 million reduction to revenue recorded in relation to the estimated financial impact of Peloton’s voluntary recall of its Tread+ and Tread products
Total revenue less transaction costs1 was $133.7 million, compared to $(9.3) million in the third quarter of fiscal 2020, primarily as a result of the strong revenue growth; third quarter of fiscal 2021 transaction costs included an $83.3 million year-over-year decrease in provision for credit losses driven by an improved credit outlook
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