Merchant Adoption And Global Expansion Will Drive Future Success

Key Takeaways

• Expansion into new markets, product innovation, and strategic partnerships position Affirm for increased market share and revenue diversification in both online and offline retail.
  
• Proprietary technology, strong risk management, and customer loyalty enhance margins, operational efficiency, and support long-term earnings growth.
  
• Dependence on key merchant partners, rising competitive pressures, profitability challenges, international expansion risks, and macroeconomic headwinds threaten Affirm's growth, margins, and revenue diversification.

Catalysts

Operates payment network in the United States, Canada, and internationally.

• Adoption by a growing base of merchants and consumers, combined with expansion into new geographies (notably the imminent U.K. entry via Shopify), positions Affirm to capture larger volumes as e-commerce and embedded finance become increasingly central to global retail-likely driving top-line revenue growth.
  
• Affirm's differentiated technology and underwriting (evidenced by the success with 0% APR loans and high user repeat rates) should improve customer lifetime value and reduce credit losses, supporting enhanced net margins and sustained earnings as more users graduate to interest-bearing products.
  
• Rapid growth and strong engagement with Affirm Card-an actively invested product moving toward high attach rates and greater offline usage-expands Affirm's addressable market beyond online retail, diversifies revenue streams, and drives higher frequency of transactions, which should accelerate GMV and contribute to margin improvement.
  
• Deployment of AdaptAI and other proprietary risk/pricing analytics gives Affirm a competitive edge in optimizing merchant and consumer conversion, reflected in measurable GMV increases for participating merchants, which will help support higher gross margins and revenue efficiency over time.
  
• Affirm's embrace of point-of-sale and wallet integrations (such as with Stripe Terminal and other PSPs) unlocks large untapped offline retail and cross-platform opportunities, aligning Affirm's growth trajectory with broader industry trends in digitization and embedded finance, with a probable positive impact on future revenue scalability and market share.

Affirm Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Affirm Holdings's revenue will grow by 22.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.6% today to 12.6% in 3 years time.
• Analysts expect earnings to reach $756.6 million (and earnings per share of $2.04) by about September 2028, up from $52.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $967.1 million in earnings, and the most bearish expecting $291.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 56.5x on those 2028 earnings, down from 532.4x today. This future PE is greater than the current PE for the US Diversified Financial industry at 16.4x.
• Analysts expect the number of shares outstanding to grow by 3.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.11%, as per the Simply Wall St company report.

Affirm Holdings Future Earnings Per Share Growth

Risks

• The impending loss of a large enterprise merchant partner (integration "goes away" at the end of fiscal Q1) could materially reduce revenues and slow GMV growth, especially over the holiday season, impacting Affirm's ability to maintain overall growth and earnings stability.
  
• The rapid expansion of 0% APR products-currently less profitable and heavily reliant on merchant subsidies-may pressure net margins if merchant adoption stagnates, marketing budgets shrink, or competitors compress take rates, ultimately constraining long-term profitability and revenue growth.
  
• Intensifying competition from both major tech players (e.g., Apple, PayPal, Square) and aggressive/irrational new entrants in BNPL and digital lending could erode Affirm's market share and pricing power, depressing gross margins and long-term revenue expansion.
  
• Expansion into international markets (U.K. and Europe) carries significant execution and regulatory risks (local licensing, data access, established incumbents, lower brand awareness), which could raise customer acquisition costs, slow user growth, or result in sub-scale operations, dampening anticipated revenue diversification and operating leverage.
  
• Affirm remains highly exposed to macroeconomic shifts affecting U.S. consumer health (e.g., student loan repayment resumption, higher interest rates, potential for rising delinquencies or unemployment); any deterioration could raise credit losses, increase provision expenses, and negatively impact bottom-line earnings even with strong current credit performance.

Valuation

• The analysts have a consensus price target of $93.184 for Affirm Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $115.0, and the most bearish reporting a price target of just $64.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.0 billion, earnings will come to $756.6 million, and it would be trading on a PE ratio of 56.5x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of $85.31, the analyst price target of $93.18 is 8.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.