Confirm stock plunges to record low after Peloton’s struggles weigh on forecast

Confirm stock plunges to record low after Peloton’s struggles weigh on forecast

Shares in Affirm Holdings Inc. plummeted Tuesday afternoon after executives lowered their full-year guidance for the buy-now-pay-later company amid troubles at one of its key partners in recent years, Peloton Interactive Inc.

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Shares fell more than 18% in after-hours trading immediately after the results were announced, after closing up 0.1% at $15.64. After-hours prices would be record lows for the fledgling company, which went public in early 2021 at $49 per share; The stock has not traded below $13.64 in a regular session since, but traded below $13 in Tuesday afternoon’s extended session.

The company reported a total loss of $278.3 million, or 86 cents per share, for the first quarter, compared to a loss of $311 million, or $1.13 per share, in the year-ago quarter. The FactSet consensus was for a loss of 84 cents on a GAAP basis.

Affirm’s revenue rose to $361.6 million from $269 million, while analysts had expected $360 million. The company’s total revenue, excluding transaction costs, was $182.3 million.

The company’s active merchant count increased to 244,900 from 235,000 on a sequential basis, while Affirm’s annual active customers increased to 14.7 million in the September quarter from 14 million in the June quarter. Affirm reported $4.4 billion in gross merchandise volume, or the dollar value of transactions on its platform, for the quarter.

The problem seemed to lie in Affirm’s guidance, as executives trimmed their full-year guidance after the fiscal first quarter and missed their second-quarter revenue guidance while grappling with a massive drop in demand for Peloton PTON bikes had.

“Given the current volatile macroeconomic environment and the ongoing and pronounced slowdown in one particularly large trading partner, we are reducing our outlook for fiscal 2023,” executives wrote in a letter to shareholders. “As we actively work to mitigate these headwinds and drive profitable growth, we remain excited about the opportunities ahead.”

While executives declined to mention Peloton there by name, they weren’t shy about stating elsewhere in the letter how the demise of the exercise bike company that became popular at the start of the COVID-19 pandemic was impacting their business.

“During the pandemic, we saw a significant shift in the GMV mix to Peloton, which had customers with excellent credit quality,” executives wrote in a letter to shareholders. “However, Peloton represented less than 2% of our GMV in Q1 2023, versus 23% and 18% of GMV in FY20 and FY21, respectively.”

Affirm executives are forecasting full-year gross merchandise volume of $20.5 billion to $21.5 billion and revenue of $1.6 billion to $1.68 billion. Management’s previous guidance for the full year was GMV of $20.5 billion to $22.0 billion and revenue of $1.625 billion to $1.725 billion.

For the second fiscal quarter, executives are forecasting sales of $5.73 billion to $5.83 billion and revenue of $400 million to $420 million. According to FactSet, analysts, on average, were expecting a volume of $5.56 billion and revenue of $434 million

In the process of announcing the company’s results, investors focused on how Affirm’s business is faring in the current economic climate and how the debt financing has performed.

“Details of how the company is managing the effects of an environment of higher interest rates, tightening of the credit box and funding costs will be… key topics,” Bank of America’s Jason Kupferberg wrote ahead of the report.

Affirm shares are down about 90% over the past 12 months as the S&P 500 SPX,
has decreased by 19%.

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