By Chibuike Oguh
NEW YORK (Reuters) -Shares of Affirm Holdings Inc rose nearly 33% on Friday after the U.S. financial technology firm reported better-than-expected quarterly results based on an uptick in loan transaction activity amid higher interest rates.
Affirm, which offers shoppers buy-now-pay-later (BNPL) credit, exceeded analyst expectations when it reported late on Thursday that its fiscal fourth quarter net revenue rose 22% to $445.8 million due to a 25% growth in gross merchandise volumes to $5.5 billion. Its current net revenue forecast of up to $455 million was also ahead of estimates, according to Refinitiv data.
But Affirm remained a money-losing business, with the net loss widening by 10% to $206 million as transaction and operating costs rose during the quarter.
Affirm's shares soared to $18.32, the highest level in nearly a month, and are on course for their biggest daily percentage gain in over a year. The shares were last up 30.1% at $17.97, up more than 80% year-to-date.
Still, the stock is a fraction of its all-time-high of about $177 reached in November 2021 when the pandemic resulted in an online shopping boom.
At least five Wall Street analysts covering Affirm raised their price targets for the stock following the report, and the median target is $15.50.
"We consider Affirm misunderstood as detractors argue BNPL is not a durable tender type but rather a simple credit card substitute, susceptible to the same macro factors affecting legacy issuers' economics. We could not disagree more," Truist analysts, led by Andrew Jeffrey, wrote in an investor note.
Affirm and other BNPL providers have been tightening their lending standards in an attempt to regain the favor of Wall Street investors, who have shunned securities originated by fintech firms owing to concerns about rising loan defaults amid the sharp rise in U.S. interest rates.
The total short interest in Affirm's stock is currently worth $510 million, representing nearly 17% of the company's free float. Short sellers have so far made $338 million of mark-to-mark losses this year betting against Affirm's shares, including about $161 million in losses following today's price gain alone, according to Ihor Dusaniwsky, a managing director at S3 Partners.