Coming off a big year for AFRM stock, beating profit and revenue consensus estimates will naturally be possible catalysts for Affirm Holdings when it reports fiscal second-quarter earnings on Thursday. But two other financial metrics will also be key for the consumer financing firm and Affirm stock.
Affirm provides buy now, pay later (BNPL) services as a payment alternative to credit cards. With BNPL options, consumers pay off purchases in monthly installments, either with low interest or none at all. Affirm competes with Klarna and Block's Afterpay as well as many others in a crowded market.
Meanwhile, analysts say AFRM stock could get a boost if it handily beats on gross merchandise volume, or GMV. It's the total value of transactions handled by Affirms' digital payment platforms.
AFRM Stock: GMV Growth Key
Wall Street analysts are predicting a loss of 72 cents on an adjusted basis, narrowing from a loss of $1.10 per share a year earlier. Net revenue is expected to climb about 30% to $520.7 million.
Estimates for GMV growth have been going up. Analysts predict GMV will come in at $6.948 billion, up about 23%.
At Morgan Stanley, analyst James Faucette said in a report: "After what appears to be a robust holiday period for BNPL, third party data points have indicated AFRM could deliver 30%-plus GMV growth relative to consensus at 23% year-over-year."
Affirm's biggest BNPL partners are Amazon.com and Shopify.
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New Affirm Card A GMV Driver
On the stock market today, AFRM stock rose 1.7% to 45.40. Affirm stock has shot up 160% over the past 52 weeks, though shares have pulled back slightly since Jan. 1.
While BNPL is Affirm's core business, there's also the new Affirm Card. The Affirm Card works as a debit card that links to consumer checking accounts at banks. It allows consumers to pay for purchases right away or request to pay for purchases over time.
Deutsche Bank analyst Bryan Keane expects the Affirm Card to boost GMV is Q4.
"The Affirm card offering has shown good traction, helping boost results, and we now expect it to drive $400 million in GMV for the fourth quarter," Keane said in a report.
AFRM Stock: What's 'RLTC' About?
Meanwhile, there's another key financial metric for AFRM for investors to know about. That's revenue less transaction costs (RLTC), said Mizuho Securities analyst Dan Dolev in a report.
Wall Street analysts are predicting RLTC of $198.1 million in the fourth quarter. RLTC is expected to be about 7.5% of total GMV.
Dolev said in a report: "For context, RLTC as a percentage of GMV is AFRM's key operating metric and represents revenues from merchants, interest income, loan sales, and servicing income less funding costs, provisions for credit losses, losses on purchase commitments, and processing and servicing costs divided by the total in-period GMV."
Coming into the fiscal Q2 earnings report, AFRM holds a Relative Strength Rating of 99 out of a best-possible 99.
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