Why Is Affirm (AFRM) Stock Down Today?

It’s certainly a tough time to be a growth investor. When seemingly anything worked last year, investors jumping into high-multiple names such as Affirm (NASDAQ:AFRM) couldn’t go wrong. However, the decline in AFRM stock has been violent, with this stock heading more than 11% lower today at the time of writing.

he Affirm (AFRM) mobile app icon is seen on an iPhone. Affirm, legally Affirm Holdings, Inc. is an American financial technology company based in San Francisco, California.
Source: Tada Images / Shutterstock.com

There are many macro catalysts that are at least partially responsible for this move. Rising rates from the Federal Reserve have crimped growth expectations for the economy. Furthermore, these higher rates increase the discount rate used to value all stocks. For higher growth companies like Affirm, these rising rates aren’t a good thing.

Additionally, from a business model standpoint, higher rates stand to impact the consumer in a negative way. With less borrowing power, buy now pay later (BNPL) firms like Affirm could see some serious headwinds, should delinquencies pick up.

The outlook isn’t great, overall, for the BNPL sector. However, there’s another catalyst that’s dragging Affirm and its peers lower today. Let’s dive into what investors are watching with this stock.

Why Is AFRM Stock Sinking Today?

Most stocks in the fintech and lending spaces are seeing impressive declines today. Much of this has to do with Upstart (NASDAQ:UPST), which reported earnings earlier today.

Upstart’s numbers missed the mark, and the company also reported a major full-year revenue forecast cut, which caught the market by surprise. At today’s lows, Upstart shed more than 60% of its valuation.

That’s a big move, and investors have rightly taken notice.

Loan volumes are expected to continue lower, something investors may have already anticipated. However, the speed of this reduction may be worse than expected, prompting fears that BNPL companies like Affirm may be in worse shape moving forward.

It may be too soon to tell how Upstart’s results will correlate with Affirm’s. The company is expected to report earnings on May 12. That said, it’s clear investors are growing a lot less optimistic about what the numbers may be in light of this bombshell earnings report from Upstart.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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