Shares of buy-now-pay-later company Affirm Holdings rose on Wednesday after it announced a partnership with Amazon Pay.
Affirm’s (AFRM) stock value soared more than 20% midday once the news broke out and later closed 2.40% higher at $16.20. The company’s stock performance helped moderate the loss in the Nasdaq Composite index, which declined by 1.29% to finish at 13,104.90.
In contrast, Amazon (AMZN) fell by 4.25% to close at $121.23 in stock trading. Previously, Wells Fargo analysts said Amazon might rally up to 30% in the coming years by improving margins and using new fulfillment models.
This deal is an extension of Amazon’s earlier agreement with the payment solution in 2021. In the previous agreement, select customers at Amazon’s e-commerce platform could use Affirm to divide the total costs of their purchases in monthly installments.
In a note to clients, Truist managing director Andrew Jeffrey said the integration of Adaptive Checkout into Amazon Pay would boost Affirm’s product visibility and adoption among merchants and consumers. Amazon’s significant share in the e-commerce sector is “integral” to the BNPL company’s growth.
“Although currently difficult to quantify, we contend integration of Adaptive Checkout into Amazon’s digital wallet will boost visibility, merchant and consumer adoption.”
Andrew Jeffrey, Managing Director at Truist
Jeffrey wrote that tech giant Apple’s entrance to the BNPL sector had weighed on the stock prices of Affirm and its peer, PayPal — which slid 1.51% to $64.04 on Wednesday.
Affirm’s stock has been down by around 35% over the past year and lost approximately 80% of its value since its initial public offering in January 2021. According to Jeffrey, Apple’s growing share in the sector is linked to its flagship iPhone integration.
In addition to Apple and PayPal, Affirm also faces competitors like fellow American fintech firm Block (SQ) and the Swedish-based Klarna. Analysts said the increasingly competitive BNPL landscape had forced Affirm to downsize, with the BNPL platform cutting 19% of its workforce last February.
Despite the growing competition in the sector, Affirm CEO Max Levchin argued that the addition of “big” players like Apple could be positive for BNPL. Levchin said Apple would not invest in the sector if the company did not see its prospect.
Affirm shares also saw a significant decline last month after publishing its earnings report for the first quarter of the year. Affirm reported a 7.4% year-over-year increase in revenue from January to March 2023. However, the company’s earnings per share were at -$0.69, a sharp drop from -$0.19 in the same period last year.
New feature attracts more customers
Amazon Pay director Omar Soudodi said the Adaptive Checkout function does not only accommodate existing customers but also helps merchants attract new ones. Merchants using Amazon Pay, such as USA Berkey Filters and Casper, say they anticipate an increase in sales on conversion rates when reaching out to new customers.
Affirm president Libor Michalek said the increasing use of digital wallets will benefit its business over time, adding that digital wallets are expected to represent more than half of global e-commerce transactions by 2025.
Affirm says Adaptive Checkout does not influence customers’ credit scores. It also claims that the feature does not impose hidden fees on users. Customers must make purchases over $50 to use the feature.