Affirm’s stock fell more than 11.5% on Wednesday to its lowest level since October 1, leaving it down 25% from its high for the year. The selloff extended after strong US inflation data pushed bond yields higher.
Affirm stock drops after US inflation report
Top companies in the buy now, pay later (BNPL) industry slipped substantially after the US published the latest consumer inflation report, which boosted bond yields.
The report showed that the headline Consumer Price Index (CPI) rose from 3.4% in August to 3.7% in September. Core inflation also jumped to 2.6%, higher than what analysts were expecting. US bond yields continued rising, with the ten-year rising to 5.2%, while the five-year rose to 5.0%.
Klarna, another top BNPL company, dropped by 2.80%, while Sezzle fell by over 6.30%. Block, which owns AfterPay, dropped by over 2.50%.
These stocks fell as the US inflation report weighed on sentiment. A hot inflation reading has a mixed impact on companies in the buy now, pay later (BNPL) industry. On the positive side, it pushes consumers to use BNPL more to manage their cash flow. It also lifts transaction values, as rising prices boost gross merchandise volume (GMV).
On the negative side, higher inflation leads to higher default and funding rates. The funding aspect is important because Affirm relies on different financing arrangements, including warehouse facilities, securitizations, and loan sales. When interest rates rise, the cost of financing rises.
Affirm’s growth is continuing
The most recent results showed that Affirm’s business continued doing well in the second quarter as demand for its products rose. Its gross merchandise volume (GMV) rose by 36% to $14.1 billion, while its revenue soared by 33% to $1.2 billion.
Other metrics were also strong, with its active customers rising by 21% to 27.8 million, and its active merchants hitting 571,000. Most importantly, the company’s delinquency rate has remained quite stable in the past few months.
The 30+ day delinquency rate remained at 2.8% in the last fiscal year. Its 60+ and 90+ day delinquency rates moved to 1.6% and 0.7%, respectively.
Analysts expect its last quarter’s revenue rose by 30% to $1.2 billion, while its earnings per share move from 61 cents to 86 cents.
Affirm stock technical analysis
AFRM stock chart | Source: TradingView
The daily chart shows that the AFRM stock has slumped from a high of $90 in August to the current $70. It has slumped below the 38.2% Fibonacci Retracement level.
The stock has now moved below the 50-day and 100-day Exponential Moving Averages (EMA). It also slipped below the Ichimoku cloud indicator.
Therefore, the stock will likely continue falling in the near term. If this happens, the next level to watch will be at the 61.8% Fibonacci Retracement level of $60.
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