Down another 30% in the month of June, the unraveling of buy now, pay later company Affirm (NASDAQ:AFRM) continues. Things were looking up for Affirm stock in May. AFRM stock rose 30% immediately after the company issued fiscal third quarter financial results that beat Wall Street forecasts.

But sadly, the rally was short-lived and Affirm continued to trend lower throughout June. The stock is down 77% year-to-date. Affirm Holdings is being hit by both a stock market that continues to trend lower, and increasingly negative sentiment toward the entire “buy now, pay later” market.

AFRM stock’s recovery is not guaranteed.

Positive Results

Despite its deteriorating share price, Affirm Holdings managed to deliver fiscal Q3 results in May that both surprised and impressed analysts. The company, led by Max Levchin, who previously co-founded PayPal (NASDAQ:PYPL), announced that its revenue grew 54% in its most recent quarter from a year earlier, and that the number of active merchants on its platform increased to 207,000 from 12,000 a year earlier. The number of active consumers using Affirm rose 137% to 12.7 million.

The company attributed its better-than-expected results to higher interest income and strong loan volumes. And while the earnings were stellar, Affirm Holdings also raised its full-year revenue forecast to between $1.33 billion and $1.34 billion, up from $1.29 billion to $1.31 billion previously. The upward revision also made analysts and investors take notice. As mentioned, AFRM stock popped 30% the day after the company made its earnings and guidance public.

Trouble Brewing

While Affirm Holdings’ most recent results were a confidence booster, the long-term outlook for the company is less assured. Several storm clouds are forming that threaten to further rain on the company and its business model that focuses on loans to primarily younger consumers. These include rising interest rates that could make its loans more expensive and lead to a greater number of defaults, a continued lack of profitability and high cash burn rate, increased criticism of the entire buy now, pay later sector and rising competition, notably from technology giant Apple (NASDAQ:AAPL).

Apple’s entry into the buy now, pay later space is the gorilla in the room presently. The iPhone maker announced in June that it is launching “Apple Pay Later,” a new service that will enable U.S. consumers to break the cost of a purchase into four equal payments over a six-week period without incurring any interest or fees. It’s a business model eerily similar to Affirm’s and a direct competitive threat. Apple Pay Later is scheduled to launch in September of this year and offers many advantages that could give it an edge.

Because Apple Pay Later will be integrated directly with Apple Pay and Apple Wallet, it won’t require a third party to facilitate transactions. Also, Apple is able to easily fund its buy now, pay later loans using its $51.5 billion cash war chest. These facts alone could help vault Apple to the front of the buy now, pay later space this fall. If Apple’s emergence in the $120 billion buy now, pay later market weren’t bad enough, the U.S. Consumer Financial Protection Bureau is in the middle of an inquiry into buy now, pay later over accusations of predatory lending practices that are putting people deep into debt.

Don’t Buy AFRM Stock

Sadly, Affirm Holdings’ most recent earnings print has been overshadowed by a run of bad news, the worst being that Apple is about to muscle in on its turf. This, along with the other negative factors, continue to push the company’s share price lower. How far the stock ultimately drops is anyone’s guess. But given that it has fallen more than 77% already this year, investors should wait on the sidelines and watch for signs of a bottom before taking a position in Affirm.

Right now, AFRM stock is not a buy.

On the date of publication, Joel Baglole held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.