Affirm shares have best day in three years, surge 32% after earnings beat

Affirm shares soared nearly 32% on Thursday, notching their best day in almost three years, after the provider of buy now, pay later loans beat on the top and bottom lines in its earnings report.

It was the third-biggest gain for the stock since the company's IPO in January 2021. Shares closed at $41.66.

Affirm said late Wednesday that revenue in the fiscal fourth quarter climbed 48% from a year earlier to $659 million, and that its net loss narrowed to $45.1 million from $206 million in the same period a year ago. The company beat estimates for revenue and reported a narrower-than-expected loss.

For the current quarter, Affirm sees revenue in the range of $640 million to $670 million. Analysts polled by LSEG called for revenue of $625 million.

Affirm CEO Max Levchin said in a note to shareholders that the company set a new goal of hitting operating profitability on a GAAP basis by the fiscal fourth quarter of 2025.

Analysts for Mizuho called it a "killer quarter" for Affirm in a note Thursday, and said the "prospect of turning GAAP operating income-positive" will be "a major milestone."

Even after Thursday's rally, Affirm shares are still down about 15% for the year, while the Nasdaq is up 19%. But the stock has been trending higher lately, up 47% in August. Federal Reserve Chairman Jerome Powell signaled Friday that lower interest rates could be coming as soon as September.

Bank of America analysts said in a note last month that rate cuts would be beneficial to Affirm's funding costs and for gain on loan sales. The company moved its merchants to a 36% APR cap on loans, up from 30% previously, and analysts said this "should remain a tailwind for yields and GMV growth."

Mizuho projects that a new Apple Pay partnership could add $12 billion to Affirm's total addressable market once it goes live later this year.

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