Affirm stock explodes more than 40% after Amazon deal — here's why, financially speaking

Affirm (AFRM) is poised to show investors a major jolt in its top and bottom lines amid its new tie-up with Amazon (AMZN). 

Shares of Affirm exploded more than 40% in pre-market trading on Monday after unveiling a new partnership with Amazon. The stock was the No. 1 trending ticker on the Yahoo Finance platform, too. Under the deal, Affirm — a leader in the buy now, pay later space — will help Amazon consumers finance large purchases. 

Select Amazon customers will now have the option to split the total cost of purchases of $50 or more into monthly payments by using Affirm. Consumers will not be charged late fees, a hallmark of Affiirm’s service. 

“By partnering with Amazon we’re bringing the transparency, predictability and affordability that Affirm provides today to the millions of people who shop on Amazon.com in the U.S. Offering Affirm’s alternative to credit cards also delivers more of the payment choice and flexibility consumers on Amazon want,” said Eric Morse, Affirm senior vice president of sales.

Deutsche Bank analyst Bryan Keane says Affirm will see a material tailwind to its financials thanks to Amazon. 

“Although it is difficult to forecast the exact impact of this partnership, our first back of the envelope CY22 estimate would be an annual total payment volume (TPV) contribution of ~$7.7 billion, with a potential revenue contribution of $385 million (potentially ~22% of Affirm) and incremental contribution profit of $74 million (potentially ~12% of Affirm),” Keane estimated. “Since Amazon will likely bring material volumes, Amazon likely attained attractive pricing especially given the competition for a deal of this size. However, we believe this deal is a positive for all buy now, pay later players given a solidification of the sector by Amazon and further advancement of industry adoption.”

Keane retained a Hold rating on shares of Affirm.

The Amazon deal is the latest that suggests Affirm is finally gaining the momentum promised to investors when the company debuted in the market in January. 

Earlier this month, Affirm scored a financing deal with Apple for purchases of the tech giant’s products in Canada. In July, Affirm landed a deal with Shopify to power financing options for the platform’s U.S. merchants.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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Roy Walsh

Roy Walsh

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