Rewrites throughout
By Pritam Biswas
Aug 29 (Reuters) - Affirm Holdings AFRM.O shares surged 18% as an upbeat annual forecast for gross merchandise value highlighted U.S. customers' increasing use of buy now, pay later services, at a time when analysts have flagged a rise in credit defaults due to pressure from the economic uncertainty.
BNPL, which gained popularity during the COVID-19 pandemic, allows consumers to split payments for big-ticket purchases and ease the immediate financial burden.
Its use has seen a spurt this year as import tariffs raised costs of some goods, while income growth has remained slow. Hopes of multiple rate cuts in the back half of 2025 have also driven credit spending.
"BNPL is a good model if income growth is just weak enough where people need to spread payments over time, but not so weak that they completely default. There's a huge difference between a consumer under pressure and a consumer who has already cracked," Brian Jacobsen, chief economist at Annex Wealth Management said. Affirm's management forecast fiscal year 2026 gross merchandise value (GMV) - the total dollar amount of all transactions on its platform - to be more than $46 billion, above analysts' consensus of $45.67 billion, according to data compiled by LSEG.
Its peer PayPal PYPL.O reported a volume growth of 20% at its pay later segment from the year earlier in its latest quarterly report, while Klarna said that its revenue grew 20% in the second quarter, earlier in the month.
Affirm's shares jumped more than 18% in early trading on Friday to $94.55, a nearly four-year high. The stock has gained nearly 31% so far in 2025 as of last close, outperforming the 11% rise in the broader benchmark S&P 500 index .SPX.
However, BTIG analysts expect the company to face margin pressure in the near term due to increased competition from traditional credit cards and other fintechs.
Besides, most BNPL providers, barring a few including Affirm, do not report their loans to credit reporting agencies, making comprehensive data on BNPL delinquencies scant.
U.S. consumers with even the highest credit scores are starting to fall behind in debt repayments, according to a report by credit scoring company VantageScore earlier this week.
"Those who have the cash are using it and those who don’t are running up the credit card bills, sometimes falling behind. Companies are saying that even high-income consumers are looking for bargains," said Brian Jacobsen, Chief Economist at Annex Wealth Management.
WALMART EXIT
Affirm's strong forecast also signaled resilience after Walmart WMT.N announced an end to their six-year-old payments partnership in early 2025. The retail behemoth will gradually shift to Swedish rival Klarna.
"GMV guidance came in better than expected, which was a particular area of focus by investors as a major enterprise client is going to be removed in FY26," said RBC Capital Markets.
The company reported revenue of $876.4 million for the quarter ended June 30, beating estimates of $837 million, driven by strong income from interest.
(Reporting by Pritam Biswas in Bengaluru; Editing by Leroy Leo and Nupur Anand)
((Pritam.Biswas@thomsonreuters.com;))
