International E-Commerce Expansion Will Unlock Digital Financing Potential

Key Takeaways

• Strong partnerships and product innovation are expanding market reach, driving increased merchant adoption and strengthening Affirm’s positioning among digital payment competitors.
  
• Focus on AI-driven credit risk controls and international expansion enhances profitability prospects while supporting stable growth across consumer and merchant ecosystems.
  
• Intensifying competition, reliance on key partners, structural margin pressures, international execution risks, and macroeconomic headwinds threaten sustainable growth and profitability.

Catalysts

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

• Affirm’s accelerating growth in both transaction volume and user base is fueled by broad merchant adoption and strong consumer demand for flexible, interest-free payment options, especially among younger demographics and e-commerce channels, positioning the company to capitalize on the ongoing migration away from cash and traditional credit cards and thus drive sustained revenue expansion.
  
• The company’s strategic partnerships with major retailers like Amazon, Walmart, Costco (announced), and Shopify, along with investments in direct-to-consumer products such as the Affirm Card, are widening its addressable market and enhancing operating leverage, contributing to higher gross merchandise volumes (GMV) and supporting improvements in net margins over time.
  
• Affirm’s differentiated approach to true interest-free (zero-APR) promotions, which are directly linked to higher conversion rates, superior credit quality, and long-term customer acquisition for its ecosystem, is strengthening its brand trust and positioning it to benefit disproportionately as merchants and end-users increasingly favor transparent digital financing—positively impacting both lifetime value and future earnings.
  
• International market expansion, notably in the UK through partnerships like Adyen and upcoming launches with Shopify, unlocks new growth vectors and cross-border transaction opportunities. This aligns Affirm with accelerating global e-commerce and the rising adoption of digital alternative financing, further supporting top-line growth.
  
• Substantial ongoing investments in proprietary AI and risk management technology have resulted in disciplined credit outcomes and low delinquency rates, not only reducing potential credit losses but also boosting capital partner confidence—a dynamic likely to further suppress volatility in net earnings and support a path toward GAAP profitability.

Affirm Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Affirm Holdings's revenue will grow by 25.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from -2.1% today to 12.3% in 3 years time.
• Analysts expect earnings to reach $732.8 million (and earnings per share of $2.03) by about May 2028, up from $-62.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.1 billion in earnings, and the most bearish expecting $378.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 41.4x on those 2028 earnings, up from -268.2x today. This future PE is greater than the current PE for the US Diversified Financial industry at 15.4x.
• 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 7.86%, as per the Simply Wall St company report.

Affirm Holdings Future Earnings Per Share Growth

Risks

• Competitive pressures from both existing BNPL players and large incumbents (e.g., Visa, Mastercard, PayPal, banks) continue to intensify, with management noting merchants are actively pitched more aggressive economics by rivals—this could negatively impact Affirm’s pricing power, net margins, and ability to retain or renew major merchant relationships, especially as contract terms come up for renegotiation.
  
• The sustainability of GMV growth is partially tied to large enterprise partnerships (Walmart, Shopify, Costco, Peloton); any deterioration or loss in these partnerships could create significant revenue volatility due to high customer and merchant concentration risk, impacting both topline growth and earnings stability.
  
• Heavy reliance on 0% APR loan promotions, while positive for brand and user acquisition, entails structurally lower margins compared to interest-bearing loans; as the mix shifts further to 0% products, management admits this pressure on revenue and profitability is “totally worth it” for long-term LTV, but the delayed monetization and reduced short-term revenue growth may challenge sustained profitability, especially if consumer acquisition costs rise.
  
• Affirm’s growth strategy depends on the rapid development and adoption of its card and international expansion (notably the U.K. with Adyen and Shopify); any delays, execution risk, or lower-than-expected adoption rates in these initiatives could undercut projected revenue diversification and future net earnings.
  
• Management acknowledges their underwriting and credit performance is currently strong but that any macroeconomic downturn, regulatory changes, or student loan/garnishment shocks could lead to higher delinquencies and necessitate tighter underwriting, which would slow growth and potentially increase credit losses and loan loss provisions, directly impacting net margin and investor confidence.

Valuation

• The analysts have a consensus price target of $67.292 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 $83.0, and the most bearish reporting a price target of just $53.0.
  
• 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 $732.8 million, and it would be trading on a PE ratio of 41.4x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of $51.71, the analyst price target of $67.29 is 23.2% higher.
  
• 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.