What is the business model for Affirm

Affirm - Expensive bet on the future of eCommerce

Max Levchin is a serial offender. The Ukrainian, who left Kiev for Chicago in 1991 at the age of 16, first attracted attention when he merged his first company Fieldlink with Elon Musk's X.com in 2000 - PayPal was born. When the payment service provider was later sold on eBay, Levchin had the start-up capital to try your hand at startups after an interlude at Yelp. This is how the fintech company Affirm came into being in 2012, which celebrated a brilliant debut on the Nasdaq on Wednesday (January 13th): Around 24.6 million shares in the installment payment specialist for online purchases were allotted to investors at US $ 49.00 per share . In the meantime, the paper has given the lucky shareholders a profit of 123% from the very beginning. Similar to Klarna or Afterpay, AffirmOnline shoppers have the option of paying off their online purchases by paying in installments, with all three fintechs promising their customers to be cheaper and more transparent than, for example, the classic credit card provider. Affirm can now refer to more than 6.2 million customers who have now processed 17.3 million transactions with a gross present value of 10.7 billion dollars at 6,500 merchants. About 64% of customers are returning. Of course, building up the company costs money. In 2019/20 (as of June 30th) sales increased significantly, but the net loss was only marginally limited to 112.6 million dollars. Owners are currently shouldering a loss of 2.63 (FY 2018/19: 2.84) dollars per share, which, according to our expectations, will only be reduced gradually in the coming years. The eCommerce future certainly belongs to companies like Affirm: In a few years' time, “Generation Z” and millennials will develop into one of the consumer groups with the highest purchasing power and at the same time a great affinity for eCommerce. In the meantime, online trading still has the best years of growth ahead of it: According to estimates, it should reach 3.4 trillion. Dollars (2019) up to 5.8 trillion. Dollars climb in 2023. Nevertheless, the rating of Affirm after the rapid stock market debut seems too high to us. Because neither profits nor dividends will be an issue in the coming years, classic valuation indicators such as the P / E ratio or a dividend yield will not be used for assessment, but a good indication of the customer value per user can be derived from the current market value: with afterpays, these are included a market capitalization of $ 24 billion and 13 million users, approximately $ 1,850 per customer; at Klarna only around 975 dollars (market value: 10.7 billion dollars; number of users: 11 million) - at Affirm, given a market value of 43.5 billion dollars, each of the 6.2 million users is 7,015 Dollars priced in. That seems too exaggerated to us.

Affirm lands on the watch list.

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