Inside Apple's Deal With Affirm (NASDAQ: AFRM)

Buy Now, Reap Later? Affirm (AFRM), the buy now, pay later company, rallied over 12% on Wednesday after announcing a new partnership with Apple (AAPL). This deal will allow Apple Pay users to use Affirm's loan options for payments. Affirm CEO Max Levchin highlighted the significance of "unbundling the credit card" as the way of the future. He suggested Affirm's growth trajectory could mirror that of Shopify, accelerating over time through consistent iteration. What’s the current reality? JPMorgan estimated that Apple Pay currently accounts for high single-digit percentages of US e-commerce volumes. However, Apple Pay's growing presence could increase substantially in the coming years.

Why Now?

While analysts see this partnership as a big plus for Affirm, they note the broader implications for the evolution of fintech and the credit card industry. The rising popularity among consumers of alternative payment platforms like Apple Pay could in time challenge credit card providers like JPMorgan. Affirm stands to gain quite a bit from this partnership. Despite this big rally, the company has lost money consistently since it was founded in 2012. This includes its $472 million loss so far this year. Affirm's share price remains down around 70% year-to-date and 20% since its IPO, indicating significant room for further upside if the Apple partnership proves successful.

What The Analysts Are Saying

While this deal sounds like it could be good news for Affirm down the road, analysts remain cautious about the company’s near-term prospects. They differ as to whether the stock is a hold, buy, or sell, giving AFRM a consensus hold. The average 12-month price target, based on 13 analysts’ forecasts, is $35.70. As of Thursday morning, shares were trading around $34.76, which puts AFRM's price in line with investors' predictions. Investment firms following AFRM include Morgan Stanley, Barclays, J.P. Morgan, Piper Sandler, and Goldman Sachs.

Julie Stoller does not have positions in the companies mentioned in this article. Stocks.News has positions in Apple.