Will Affirm Ever Make Money?
Plus, what happened to crypto TV ads?
Number of the Week: $36,000 (explanation below)
Will Affirm Ever Make Money?
It’s a familiar paradox of the Internet (and now fintech) age: It is entirely possible that a well-funded company with high-pedigree leadership can establish itself as a market leader within a few years, and yet never demonstrate that it can turn a profit.
Obviously Amazon is the signature example: Jeff Bezos’s colossus was founded in 1994, began selling books in 1995, and went public in May 1997. It posted consecutive losses until the fourth quarter of 2001, and that was a tiny profit of $5 million. It is easy to forget, but when the original dot-com companies began crashing in 2000, Amazon shares traded as low as $6; today they trade at about $130, and that’s after last year’s 20-to-1 split. Amazon didn’t consistently report profits until 2004.
Today, if you are a relatively new, unprofitable public company in an innovative, capital-intensive business, Amazon provides the roadmap to your happy place. The early days of e-commerce, well before it was obvious that Amazon would dominate, were filled with vision, experimentation and plenty of migraines. And from a particular perspective, Buy Now, Pay Later in 2022 might look a lot like e-commerce did in, say, 1997.
That must be what the executives at Affirm, founded in 2012, and the investors behind them, are betting on. Because while the company announced perfectly respectable fiscal fourth quarter results—quarterly gross merchandise value up 77% compared to the same quarter in 2021—on Thursday, Affirm stock got clobbered in after-hour trading and then all day Friday. True, Jerome Powell’s Jackson Hole speech Friday morning was an overall stock buzzkill, but even so, Affirm took a lot more bruises than the overall Nasdaq this week:
Why are investors so spooked? Prior to the earnings announcement, FIN reached out to multiple stock analysts, and after earnings an Affirm representative spoke to us on background. Here are the analysts’ biggest concerns, peppered with some company perspective.