Is Affirm (AFRM) Stock a Buy? Q4 Latest Results Analysis. What You NEED to Know

Introduction welcome to Dividend focus in this video we're taking a close look at airm Holdings ticker symbol afrm airm is a key player in the buy now pay later space and has been making waves in the fintech sector we'll be diving into the company's latest earnings its growth potential and whether it's a stock worth considering for your portfolio but before we get started please leave a like for the YouTube algorithm thank you very much Company Overview affirm Holdings is a leading fintech company that specializes in buy now pay later Services allowing consumers to make purchases and pay for them over time with no hidden fees the company partners with retailers to offer flexible payment options making it a key player in the growing e-commerce space a firm has been expanding its reach and continuously innovating in the financial technology sector positioning itself for future growth a firm delivered solid Q4 FY24 Highlights growth in the fourth quarter of fiscal year 2024 the company reported a 31% increase in Gross merchandise volume gmv rising to $7.2 billion from $5.5 billion last year active consumers grew by 19% reaching 18.6 million while transactions per Active consumer saw a 22% growth with users now averaging 4.9 transactions Revenue also surged by 48% year-over-year coming in at $659 million compared to $446 million in the same quarter last year this growth highlights AFF firms expanding user base and increasing engagement with its services GMV the company's gmv reached $7.2 billion in the quarter representing a 31% year-over-year growth from $5.5 billion last year this increase highlights the company's ability to drive more transactions on its platform while gmv grew substantially the average order value aov remained relatively stable at $293 reflecting consistent transaction sizes even as the platform expanded its user base affirms direct to Consumer Direct to Consumer Highlights business has seen significant growth with gmv for the affirm card contributing $57 million the affirm Marketplace and affirm card combined have shown steady growth throughout this fiscal year additionally affirm card active consumers have rapidly increased exceeding 1 million by the fourth quarter this surge in active users highlights the growing adoption of a firm's Services particularly its card offering as a key driver of its Direct consumer strategy the company's Transaction Channels transactions are powered across diverse Channels with 77% of its transactions occurring at the point of sale and 23% through a firm's direct platform in terms of product composition 75% of a firm's transactions are interest bearing while 14% come from the pay in for product which allows users to split payments into bi-weekly installments with 0% APR another 11% of transactions are from core 0% APR Products this diverse mix of offerings highlights a firm's ability to cater to different consumer preferences and drive growth across multiple channels and when Partnerships looking at the Partnerships they span a wide range of categories with general merchandise leading the way at 34% of gross merchandise volume for the quarter travel and ticketing make up 16% while fashion and Beauty account for 15% notably the other category which includes a mix of Industries saw a 60% year-over-year growth in volume Electronics Home lifestyle and equipment Auto also contributes significantly to the company's gmv showcasing a firm's ability to support transactions across a diverse array of sectors while maintaining strong growth momentum in key categories a firm's Active consumer Active Consumers base grew by 14% reaching 18.7 Million by the end of this fiscal year excluding returnly the growth stands at 19% the number of transactions per Active consumer also increased significantly by 26% with consumers averaging 4.9 transactions this demonstrates that a firm is not only expanding its user base but also increasing user engagement on its platform with consumers making more frequent use of its services and when Quarterly Transactions looking at transaction volume the company's quarterly transactions saw 42% growth reaching 24.7 million transactions in the quarter a significant portion of these 93% came from repeat customers underscoring the platform's ability to retain users firsttime customers transactions made up only 1.6 million highlighting the loyalty and engagement of a firm's existing user base this strong repeat customer rate showcases a firm's success in driving consistent usage of its buy now pay later services and when looking Revenue Growth at their revenue growth the company's Revenue surge by 48% in the quarter reaching $659 million up from $446 million in the same quar of the previous year this growth demonstrates a firm's ability to monetize its platform more effectively as the percentage of gmv contributing to revenue increased to 99.1% a firm's focus on expanding its Revenue base while maintaining a stable gmv to revenue conversion rate reflects its successful execution in scaling its offerings a firm's transaction costs Transaction Costs have been steadily increasing alongside its growing platform usage in Q4 transaction costs reach $350 million representing 4.8% of gmv up from $180 million or 4.1% of gmv in the same quarter the previous year however when excluding Provisions transaction costs were 232 million or 3.2% of gmv showing that a firm continues to manage its operating expenses efficiently despite the increase in costs the company's ability to keep transaction costs proportional to gmv indicates solid operational efficiency a firms Revenue Revenue Less Transaction Costs less transaction cost metric has seen significant Improvement growing by 70% year-over-year to reach 300 9 million in Q4 this growth highlights the company's ability to generate more efficient Revenue relative to its transaction costs when excluding Provisions Revenue less transaction costs increased by 54% year-over-year reaching $427 million this indicates that a firm is managing its transaction costs well while continuing to scale its platform which further strengthens its profitability Outlook and when looking at their Operating Expenses operating expenses a firm has shown a notable downward Trend in relation to Revenue across key categories in the technology and data analytics segment expenses decreased as a percentage of revenue from 42% to 24% year-over-year sales and marketing expenses also declined falling from 46% to 25% of Revenue reflecting a firm's focus on cost efficiency while growing its platform General and administrative expenses dropped from 43% to 18% of Revenue demonstrating better management of overhead costs this overall reduction in operating expenses highlights a firm's effort to streamline operations while achieving better operational efficiency a firm's Gap operating income GAAP and Adj. Operating Income showed a continued loss throughout the fiscal year though there has been some improvement from previous quarters the company reported a gap operating loss of $161 million in Q4 an improvement compared to the $310 million loss in Q3 however when looking at adjusted operating income a firm turned positive POS in the second half of the fiscal year reaching $150 million in Q4 with a 23% adjusted operating margin this positive shift in adjusted income reflects a firm's ability to manage costs and improve operational efficiency despite ongoing Gap losses and when Funding Capacity looking at their funding capacity it has steadily increased throughout the fiscal year reaching $16.1 billion in Q4 up from $10.6 billion in the same quarter last year the company maintained a relatively stable platform portfolio usage of around 69% of total funding capacity in Q4 highlighting its ability to manage loan origination while preserving ample funding reserves this expanded capacity positions a firm well to support future growth in loan origination and platform usage a firm's Delinquency Rate 30 plus day delinquency rate when compared to select consumer lenders shows its performance in managing delinquencies on monthly installment loan balances excluding pelaton loans as of June 2020 4 a firm's delinquency rate is higher than most other issuers aligning closely with issuer C which also has a large portion of non-prime receivables affirms 42% non-prime receivables contribute to this higher delinquency rate a firm's Financial Guidance outlook for fiscal year 2025 reflects the company's focus on continued growth and profitability the company is targeting gmv of more than $33.5 billion and expects its Revenue as a percentage of gmv to increase by at least 10 basis points over FY 2024 a firm also aims to reduce its transaction costs as a percentage of gmv by at least 10 basis points compared to FY 2024 adjusted operating margin is projected to be over 18.4% a firm expects to achieve operating income profitability on a gap basis by the fourth quarter of FY 2025 for fiscal q1 2025 a firm is forecasting gmv between $7.1 billion and $7.4 billion with Revenue projected to range from $640 million to $670 million transaction costs are expected to be between $375 million and $390 million the company anticipates an adjusted operating margin of 14% to 16% signaling strong operational efficiency moving forward this Outlook highlights continued growth and a clear focus on maintaining profitability as the company scales and when looking at the latest Analyst Ratings analyst ratings from tip ranks a firm Holdings has been given a moderate buy rating by nine analysts of these five recommend buying the stock three suggest holding and one analyst recommends selling the 12-month stock forcast indicates an average price target of $41.50 representing a potential of over 31% upside from the current price the highest price Target is $65 while the lowest is $20 this shows mixed sentiment but overall optimism about the company's future growth potential in conclusion a firm continues Conclusion to show strong growth in key metrics such as gmv active consumers and revenue with significant expansion in its direct to Consumer business and a firm card adoption although its delinquency rate is higher than some competitors due to its non-prime customer base a firm remains well positioned for future growth with increasing funding capacity and a focus on profitability by next fiscal year and Beyond analysts are moderately optimistic with a projected 31% upside potential making a firm and interesting stock for investors looking to capitalize on the fintech sector's growth personally I think a firm stock offers a compelling long-term opportunity especially with its ability to scale and innovate within the growing buy now pay later Market setting it up for substantial future gains if you found this video helpful please leave a like for the YouTube algorithm and always remember to do your own research before making any investment decisions thank you for watching and happy investing