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Despite recent growth, some investors see a darker future for the industry

Key Facts

Shares of Affirm Holdings — a provider of Buy Now, Pay Later loans — have lost 17% of their value in 2025, according to Google Finance.

In the last three years, Affirm stock has risen considerably — rising 126% to $52 a share — and the industry has expanded faster than 50% annually.

After reporting solid revenue and profit growth in the company’s third quarter — while issuing a weak forecast — is the stock a bargain?

Earlier this month, the stock fell 13% on Affirm’s weak forecast and its bet on 0% loans, according to CNBC. The bearish case is bolstered by rising BNPL default rates at Klarna and a weaker economy which could add to the bad loans.

Bulls admire the company’s industry leadership and long-term approach to running the company — a view Affirm reinforces. “It took consumers and merchants and sort of the universe about a decade to figure out what we are and just how different and important what we have found to work really is,” Affirm founder and CEO Max Levchin told CNBC.

Wall Street sees the stock as significantly undervalued. Affirm shares trade 29% below $67.18 — the average price target of of 21 Wall Street analysts, TipRanks wrote.

Affirm’s Mixed Fiscal Third Quarter Report

In Affirm’s fiscal third quarter, revenue met expectations, profit exceeded them and its revenue forecast for the fourth quarter fell short.

Here are the key numbers:

• Third quarter revenue: $783 million — up 36% from the year before and matching London Stock Exchange Group expectations, noted CNBC.
• Q3 gross merchandise value: $8.6 billion — up 36% and $400 million higher than the Street Account consensus, reported CNBC.
• Q3 earnings per share: $0.01 — better then the 3 cents per share loss LSEG anticipated, CNBC wrote.
• Q4 revenue guidance: $830 million — the midpoint of a range — which was $11 million below the LSEG consensus, according to CNBC.
• Q4 GMV guidance: $9.55 billion — the midpoint of a range — which was $350 million above the LSEG consensus, CNBC reported.

Affirm’s online loans rise or fall depending on the level of consumer spending on electronics, apparel and travel. The company has been aiming to add new customers — reaching 22 million in the third quarter, a 10% growth rate, noted CNBC.

Through partnerships with Apple , Amazon and Shopify, GMV for The Affirm Card rose 115% from the year before while the number of active cardholders more than doubled. business is closely tied to consumer spending, as its online loan offering has become popular with sellers of electronics, apparel and travel.

The company is also offering 0% interest loans in which merchants — and sometimes manufacturers — boost sales by subsidizing borrowing costs to drive sales. Such loans increased 44% — serving as an alternative to a traditional merchant discount. “It may be an expensive net discount rate, but it’s better than 10% off,” Affirm Chief Financial Officer Rob O’Hare told CNBC.

Affirm says these loans extend the lifetime value of its customers. “Every time we sign someone new through a 0% promo, some number of months or quarters from now, that’s a prime candidate for the Affirm Card, and that’s a lifetime value booster,” Levchin said on the company’s Q3 earnings call.

Rapid Industry Growth And Rising Loan Default Rates

The growth in BNPL loans has been significant in recent years. This growth has drawn new investment into the industry and loan default rates are rising for some large participants.

Since 2021, the BNPL business has accelerated at a 55% average annual rate from $97 billion, according to my June 2022 Forbes post, to $560 billion in 2025, according to Research and Markets.

To finance that growth, Affirm has been securitizing — bundling and selling — some 30% of its loans. More recently, the rise of private credit has enabled Affirm to sell loans directly to institutions.

These include insurers such as Liberty Mutual and Prudential. Moreover, this year private credit firm Sixth Street initiated a three year deal to buy $4 billion of Affirm’s loans, according to the Wall Street Journal.

Recent data suggest BNPL credit problems could rise. How so? Nearly two-thirds of BNPL loans went to borrowers with risky credit scores, according to a January report from the Consumer Financial Protection Bureau.

“Americans were using ‘buy now, pay later’ as a Band-Aid on top of their credit card debt,” Julie Margetta Morgan, a former CFPB official who is now president of the Century Foundation, told the Times. “We look at it as a kind of bellwether of risks to the overall economy,” she added.

BNPL providers downplay these risks. For example, Klarna — the privately held Stockholm-based BNPL provider which recently paused its IPO — suffered a 17% rise in credit losses in May.

Klarna said the losses were trivial. “There’s nothing troubling or worrisome from this data,” company spokeswoman Clare Nordstrom told the New York Times. Affirm was similarly upbeat. “We really aren’t seeing anything we would label as signs of stress with our borrowers,” O’Hare said, according to the Times.

Weaker Economy Could Reduce Credit Quality

BNPL customers would be especially vulnerable if the economy worsened — which is why during the Biden era, the CFPB “called for measures to safeguard them,” the Times wrote.

Unfortunately, the economy contracted in the first quarter of 2025 — with gross domestic product falling at a 0.2% rate, according to the Bureau of Economic Analysis.

As U.S. household finances get worse, BNPL consumers and providers could suffer. “Consumers are going to be squeezed and more reliant on these products,” Morgan explained to the Times, “and the companies are being offered a free pass to construct those products in ways that are the most profitable to them.”

Is Affirm Stock A Bargain?

Given the 29% upside implicit in Affirm’s price target, the bulls may prevail over the bears.

Affirm bears argue the company’s profitability fell short of expectations because the lower growth in GMV due to a surge in 0% APR loans was not sufficient to offset their revenue less transaction costs.

This is why Affirm fell short of investor expectations. The rise in 0% loans “led to a lower take rate and RLTC margin than most forecasts,” Citizens wrote, according to CNBC.

Two other analysts remain bullish on Affirm. Goldman called the company a “strong category leader in BNPL and a share gainer vs. legacy credit providers,” noted CNBC. Barclays is bullish on recent partnerships such as the one between Affirm and Costco.

Affirm sees consumers continuing to spend despite uncertainty. “People are stressed out about the economy, yet they’re shopping, they’re buying, and they’re paying their bills — at least they’re paying their bills back to us on time,” Levchin told CNBC.