Shares in Affirm Holdings, Inc. soared in early trading on Monday amid the consumer financing firm's new partnership with Amazon.com. The boost for Affirm stock follows Square's acquisition of Afterpay, which highlighted the growing role of buy now, pay later services at the point of sale.
Affirm said after the market close on Friday that Amazon is testingAffirm's system of buy now, pay later — also known as BNPL installment payment plans — with some customers. The e-commerce giant plans to make Affirm's BNPL services more broadly available in the coming months. Online retailers generally pay BNPL companies transaction fees of 4% to 5%.
"Although it is difficult to forecast the exact impact of this partnership, our first back of the envelope 2022 estimate would be an annual total payment volume contribution of about $7.7 billion, with a potential revenue contribution of $385 million (potentially around 22% of AFRM)," Deutsche Bank analyst Bryan Keane said in a report to clients. "Since Amazon will likely bring material volumes, AMZN likely attained attractive pricing especially given the competition for a deal of this size."
Affirm stock soared 47% to close at 99.59 on the stock market today. AFRM stock launched an initial public offering in January. Amazon stock climbed 2.2% to 3,421.57.
Affirm stock reports fiscal fourth-quarter earnings on Sept. 9.
Affirm also provides BNPL services to Amazon rival Wal-Mart. BNPL services generally split payments into three or four equal installments over two months or less. Walmart and Affirm, though, stretch out some BNPL plans to 18 and 24 months.
Affirm Stock: Biggest Customer Is Peloton
Consumers typically use BNPL installments when buying items such as electronics and furniture. BNPL service providers generally split payments into three or four equal installments. Consumers avoid interest and transaction fees if they pay on time.
Affirm's biggest customer has been home fitness giantPeloton Interactive(PTON), which makes pricey treadmills and stationary bikes. Other Affirm customers includeNordstrom(JWN), privately held Neiman Marcus,Dick's Sporting Goods(DKS), andWilliams-Sonoma(WSM).
Square on Aug. 1 acquired Afterpay in a $29 billion all-stock deal. AFRM stock rose on the Square purchase of Afterpay on speculation it could also be a takeover target.
As of Friday's market close, Affirm stock had aRelative Strength Ratingof only 13 out of a possible 99, according toIBD Stock Checkup.