Buy now, pay later (BNPL) company Affirm (AFRM) has seen its share price plunge around 80% from a pandemic high of nearly $170 over the past several months amid “cyclical risks” and the broader stock market pullback.
And despite recently raising its forward guidance for the 2022 fiscal year, shares again crashed over 10% on Monday following a report from Bloomberg that the company halted the sale of an asset-backed security that would have refinanced an existing revolving securitization.
In light of the company’s falling stock price, however, Affirm CFO Michael Linford said that company performance “remains strong by virtually every measure” and leadership will continue to focus on shaping the trajectory of the firm.
“I think that we don’t measure ourselves against the stock price,” Linford told. “That doesn’t mean we don’t care, because we do. But it does mean that we’re trying to focus on the things that we can control, which is scaling our business.”
Linford sees Affirm continuing to generate strong cash flow with adjusted operating margins in the range of 20% to 30%. He is satisfied with the way the company’s scaling efforts are progressing and said that Affirm will continue to execute upon its core strategy.
“That being said, specifically with respect to the trends you’re seeing in credit, the most important thing for folks to know is that we’re in control,” he added. “[CEO] Max [Levchin] and I talk a lot about how we make lots of little decisions. Affirm’s underwriting model is tuned to specific transactions. We can approve any one transaction or decline the next. And that gives us the incredible control to pick the level of loss that we have in the business.”
Affirm recently bumped its fiscal 2022 revenue guidance up to at least $1,310 million from a previous projected range of between $1,290 and $1,310 million. The company claims that its current level of committed funding — around $9.3 billion — will allow it to fund over $20 billion in annual gross merchandise volume (GMV). Linford described the current state of Affirm’s unit economics as being “robust,” pointing to growth in both GMV and revenue.
Linford believes that Affirm is well positioned to succeed in a rising interest rate environment, as the Federal Reserve is expected to announce its decision on rates by Wednesday.
“Firstly, our product means more to our consumers and merchants in the higher rate environment,” he said. “If you think about our product mix, whether that’s our interest-bearing product — where consumers might compare it to their alternatives — or a 0% product, both of those products have a better value to the consumer in a higher-rate environment.”
Linford said that Affirm views interest rate hikes as a return to normalcy, noting the company’s business growth before the pandemic when rates were closer to 2%. He believes demand for goods and services through Affirm’s BNPL model will remain strong in spite of looming macroeconomic uncertainties. And while key metrics like unemployment and spending levels may signal strength, the American consumer must continue to contend with surging prices and geopolitical risks.
“With respect to consumer demand, some of our competitors talk about the changing macro environment affecting whether or not consumers will continue to demand goods and services. I think that is missing the point about what our product does,” Linford said. “Our product enables consumers to get the things they want and need in the best way possible.”