Affirm vs. Afterpay: Which Buy Now, Pay Later Stock Is a Better Choice?

: AFRM | Affirm Holdings, Inc. News, Ratings, and Charts

AFRM – Affirm (AFRM) and Afterpay (AFTPY) are two players in the buy now, pay later segment. The companies are part of a rapidly expanding addressable market that is allowing them to grow revenue and earnings at a fast clip. But which of the two is the better stock in which to invest at current prices? Read on to learn the answer.

Over the last few years, companies have tried to revolutionize the way consumers shop. While credit cards have facilitated consumers’ ability to purchase products with debt, several entities have launched affordable payment services via the Buy Now, Pay Later, or BNPL model. The COVID-19 pandemic has accelerated the adoption of BNPL services, in-part because these arrangements can allow customers to purchase more or costlier items than they could otherwise and can also ease the costs of smaller ticket items.

A report published by Allied Market Research estimates the global BNPL market will hit $3.98 trillion by 2030, up from $90.69 billion in 2020, indicating an annual growth rate of 45.7% over this period.

Given the rapid growth in the BNPL space, let’s evaluate which company, Affirm (AFRM) or  Afterpay (AFTPY), is the better stock to buy right now.

The bull case for Affirm

Affirm Holdings in San Francisco is a BNPL platform that operates in the U.S. and Canada. Its suite of products and solutions also includes point-of-sales payment solutions. The company’s payments network and partnerships with banks allows consumers to pay for product purchases over time.

At the end of its second fiscal quarter of 2021, Affirm partnered with 29,000 merchants, up from just 6,500% in the year-ago period. The company’s gross merchandise volume in its fiscal year 2021 (ended in June) rose by 79% to $8.3 billion, while active customers rose 97% to 7.1 million.

Affirm recently disclosed a partnership with Amazon in which  the e-commerce heavyweight will allow the Affirm  to offer financing options to buyers at checkout. Further, Affirm already has a deal with Shopify that has close to 1.7 million merchants on its platform. The two deals increase Affirm’s addressable market at an impressive rate. For example, the gross merchandise volume on Amazon and Shopify stand at $443 billion and $151 billion, respectively, over  the last 12-months.

Affirm is also in the process of launching an Affirm Card that will allow users to avail themselves of the BNPL service at other retail locations.

Valued at a market cap of $40 billion, Affirm is expected to grow its sales by 37.7% to $1.2 billion in its fiscal year 2022 and by 44% to $1.73 billion in fiscal 2023. But these estimates do not account for its partnership with Amazon. Further, Affirm is also expected to narrow its loss per share from $2.72 in 2021 to $0.52 in 2023.

Square is all set to acquire Afterpay for $29 billion

Afterpay is an Australia-based BNPL company. In its fiscal year 2021, Afterpay’s underlying sales rose by 102% year over year to $21.1 billion, while its total group income was up 78% at $924.7 million. Its revenue growth came on the back of a 63% increase in the number of active customers that rose to 16.2 million. Its integrated merchant network now exceeds 100,000 and rose 77% in fiscal 2021.

In August 2021, fintech giant Square announced it will acquire Afterpay for $29 billion. Currently, Afterpay is valued at a market cap of more than $25 billion.

The final takeaway

Given Afterpay’s acquisition deal with Square, the stock has limited upside potential. It might gain less than 20% considering the acquisition price. If the deal falls through, the stock will experience a sell-off. Conversely, despite its steep valuation, Affirm is a top stock right now due to its deal with Amazon and stellar revenue growth.

AFRM shares were trading at $148.47 per share on Thursday afternoon, up $2.34 (+1.60%). Year-to-date, AFRM has gained 52.68%, versus a 19.51% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
AFRMGet RatingGet RatingGet Rating
AFTPYGet RatingGet RatingGet Rating

Most Popular Stories on

:  |  News, Ratings, and Charts

10 Best POWR Ratings Stocks

Investors love using our POWR Ratings to track down stocks likely to outperform the S&P 500 (SPY). However, on any given day there are over 1,300 that are Buy rated. This leads customers to reach out to us to discover which are the BEST of these stocks. Today I share the answer including details on the current 10 best POWR Ratings stocks. Get the rest below...

:  |  News, Ratings, and Charts

Are Stocks Ready to Break to New Highs?

The stock market (SPY) is on a 5 day winning streak and now less than 1% away from the all time highs. This quickly shakes off weeks of painful pullbacks and volatility. Is the market truly ready to ascend to new heights or is this another fake out before the next leg lower? Find out the rest below...

:  |  News, Ratings, and Charts

TTSH is this Week’s Featured Stock 

The Tile Shop Holdings (TTSH) is a leading specialty retailer of manufactured and natural stone tiles. The company has staged an impressive earnings turnaround. Read more to find out why the stock is a good buy into year-end.

:  |  News, Ratings, and Charts

Buy These 3 Tech Stocks Before They Soar Further

Tech stocks, which were underperformers at the start of the year, have made their way back as investors have been buying on the dip. Many of these stocks, which include Applied Materials Inc. (AMAT), KLA Corporation (KLAC), and Amdocs Limited (DOX) are currently in an uptrend and are expected to continue this momentum.

:  |  News, Ratings, and Charts

TTSH is this Week’s Featured Stock 

The Tile Shop Holdings (TTSH) is a leading specialty retailer of manufactured and natural stone tiles. The company has staged an impressive earnings turnaround. Read more to find out why the stock is a good buy into year-end.

Read More Stories

More Affirm Holdings, Inc. (AFRM) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All AFRM News