Shares of Affirm Holdings (AFRM) have been on a tear, surging over 118% in the past three months. The surge in AFRM stock follows a series of positive developments, including a robust fiscal Q1 2025 performance, and favorable macroeconomic developments, like the Federal Reserve's recent interest rate cuts.
Let's delve deeper into what’s driving Affirm's growth, and whether the stock can keep rising.
Strong Q1 Performance: A Solid Foundation
Affirm's fiscal Q1 2025 results showed notable growth across key operating metrics. Gross Merchandise Volume (GMV) jumped 35% year-over-year to $7.6 billion, significantly outpacing the broader e-commerce market. This growth was diversified across product categories, with travel, electronics, and general merchandise leading the way. Notably, transactions per active consumer increased 25% year-over-year to 5.1, while trailing 12-month GMV per active consumer rose 11% to $1,500.
The company also achieved a 41% year-over-year increase in revenue, reaching $698 million. Impressively, revenue as a percentage of GMV improved to 9.2%, reflecting higher monetization rates.
Expanding Partnerships: The Priceline Boost
A significant catalyst for Affirm's recent rally was the announcement of an expanded partnership with Priceline (BKNG). Affirm will now serve as the pay-over-time provider for Priceline Partner Solutions, a business-to-business (B2B) arm that collaborates with airlines, car rentals, hotels, and more. This expanded partnership allows Affirm to tap into a broader travel ecosystem, offering travelers flexible payment options directly through partner websites.
The travel and ticketing category alone grew 25% year-over-year last quarter for AFRM, underlining the demand for its services in this sector.
Following the Priceline announcement, Affirm stock surged 10.5% in a single day on Nov. 18, reflecting investor optimism about the company's ability to drive growth through strategic partnerships.
Strategic Alliances Driving Growth
In addition to Priceline, Affirm has strengthened its alliances with several other major platforms. Notably, its partnership with Apple (AAPL) recently went live, allowing consumers to pay over time when using Apple Pay on iPhones and iPads. The company also expanded its collaboration with WooCommerce and enhanced its onboarding process for Stripe merchants, making it easier for businesses to offer Affirm’s payment solutions.
Affirm's collaboration with Shopify (SHOP) continues to yield impressive results. Shop Pay Installments, powered by Affirm, has surpassed $10 billion in cumulative GMV. The company aims to scale this partnership further, which will drive its market share.
Expanding Global Footprint
Affirm is also expanding internationally. The company recently launched in the UK, and is actively building distribution partnerships to support its growth in this new market. As e-commerce thrives globally, Affirm's entry into new geographies positions it for long-term growth.
Financial Strength and Profitability
Affirm Holdings’ financials are improving, providing a solid base for future growth. Its adjusted operating income grew to $130 million in Q1, up from $60 million in the same quarter last year. Meanwhile, funding capacity reached $16.8 billion, marking the seventh consecutive quarter of growth.
Despite seasonal fluctuations in delinquencies, Affirm remains committed to maintaining robust credit discipline. Its ability to deliver attractive returns to loan buyers has spurred increased demand for its loan products, enhancing its funding capacity.
What Lies Ahead for Affirm?
Management is optimistic about Affirm's growth trajectory. The company plans to introduce more products, expand into new markets, and extend its relationships with existing partners. With consumer demand for flexible payment options on the rise, Affirm is well-positioned to capitalize on this trend.
AFRM stock currently holds a “Moderate Buy” consensus rating from analysts, up from “Hold” a couple of months ago.
The Bottom Line
Affirm looks like a strong pick for long-term investors. The company’s ability to forge strategic partnerships, expanding global footprint, and strong financial performance suggest it has plenty of runway for future growth. However, for short-term investors, it might be wise to wait for a dip before jumping into AFRM stock.
