AFRM vs KLAR, which is a better BNPL Buy ?

JC888
09-11

There is a pot of gold at the end of the rainbow, for investors of $Affirm Holdings, Inc.(AFRM)$ who have hanged on for the ‘longest’ time.

It has been a rollercoaster ride for those who have been with the stock since 2021: (see below)

As of 08 Sep 2025

  • On 01 Jan 2021, it stock price was at a whooping $98.65 per share. (see below)

  • A year on, on 14 Mar 2022, it had fallen to a very low $27.59 per share.

  • It is such a drastic contrast right !

  • Such is the experience in the fast-evolving buy now, pay later (BNPL) sector stock.

  • Investors’ faith & confidence is AFRM was really tested to the limits during these years.

  • Thankfully, its most recent quarterly performance marks a potential turning point where its fundamentals finally realign with investor optimism.

  • As of end August 2025, it closed at $88.46 per share, rounding off the week +11.58% (or +$9.18) higher.

  • On Tue, 08 Sep 2025, it recovered at $88.42 per share, after pulling back due to weak Jobs reports data the week before (see above)

Q4 2025 Earnings.

On Thu, 28 Aug 2025, AFRM reported its Q4 quarterly earnings.

Against LSEG consensus estimates:

  • Earnings per share (EPS): was $0.20 vs $0.11 estimated vs Q4 2024’s -$0.14; that’s a +242.86% YoY gain.

  • Revenue: came in at $876 million vs $837 million estimated vs Q4 2024’s $659 million; that’s a +33% YoY growth. (see chart below)

  • Net income: was $69.2 million vs Q4 2024 -$45.1 million, that’s a +253.88% gain.

  • Gross merchandise value (GMV): jumped +43% to $10.40 billion vs analysts' estimates of $9.64 billion.

[Sidetrack]

  • Gross merchandise volume (GMV) that measures the total dollar amount of transactions processed on AFRM’s platform, is a critical indicator of the company’s ability to drive merchant and consumer adoption.

AFRM’s Q2 2025 results beat expectations and made the stock attractive again

In a letter to shareholders, AFRM’s CEO Max Levchin said during fiscal year 2025, the company:

  • Expanded its merchant network.

  • Increased transaction frequency by direct-to-consumer products.

  • Focused on excellent credit performance.

This helped the company reach operating profit in Q4 2025, just as planned a year ago.

Q1 2026 Guidance / Outlook.

For current quarter, AFRM has forecasted revenue between $855 - $885 million, or $870 million (midpoint); this is about +1.20% above analyst consensus, signaling ongoing momentum.

And GMV between $10.10 - $10.40 billion and for Full-year fiscal 2026 to exceed $46 billion.

AFRM’s active consumer count hit 21 million, funding capacity grew, and delinquencies remain low, indicating resilient credit quality and increased scale.

New Price Target.

With its stellar quarterly earnings and strong current quarter guidance, institution investors have revised AFRM’s outlook and price target.

  • TD Cowen revised price target to “$115” and maintains a “Buy” rating.

  • Citizens JMP revised price target to “$105” and maintains a “Outperform” rating.

  • Needham kept AFRM’s price target status quo and maintains a “Hold” rating.

My viewpoints: (mine only)

As much as it is a “happy” ending, it has been a 3 - 4 year wait for AFRM’s turnaround that came (luckily).

On the newly revised price targets of $115 or $105, will it be another 3 - 4 years incubation in order for AFRM to reach this new peak ?

There are doubts because competition in the BNPL space is really intense.

AFRM is recognized as the first "buy now, pay later" (BNPL) stock to be listed on a US exchange, debuting on Nasdaq in January 2021.

Up until 09 Sep 2025, there is no public record of any other pure-play BNPL company completing an IPO on a US exchange and AFRM is not the only BNPL player.

Competitors going after the same pie include:

The Swedish BNPL.

In the broader BNPL competitive landscape, Klarna has been making significant strides in the US.

The Swedish fintech company has been a formidable competitor, leveraging (a) its global reach and (b) aggressive expansion strategies, attempting to encroach AFRM’s market share.

Klarna has reported strong growth in its US operations, bolstered by partnerships with retailers and a focus on enhancing its app-based user experience.

On 17 Mar 2025, the Swedish fintech firm announced that it will be the exclusive provider of BNPL loans for $Wal-Mart(WMT)$, taking the coveted partnership away from rival AFRM. (see above)

This is on top of Klarna’s impending IPO on the US exchange, on Wed, 10 Sep 2025.

Rumour has its valuation will be approximately $15 billion, with an an IPO tag of $40 per share. (see below)

This “pricing” is way above market consensus of $13 - $14 billion valuation and an IPO price of between $34 -$36 per share.

  • On Wed, 10 Sep 2025, KLAR made its debut on US exchange.

  • Intraday, it soared as high as $57.20; that’s +43% increase.

  • However, it tapered after that and closed first trading day at $45.82; that’s +14.55% higher than IPO price.

  • Post trading, its trading lower at $49.15; off intraday high but still commands a premium over its $40 IPO price.

Why Avoid ?

At this price, I would not even touch it with a pole.

This is because KLAR has reported a net loss of $53 million for Q2 2025, widening from $18 million YoY.; that’s a -194.44% decline.

Like AFRM, KLAR is known for its popular buy now, pay later products.

It had said it raised $1.37 billion for the company and existing shareholders, that sounded “impressive” on papers.

However if one digs deeper:

  • Of the total amount being raised, $1.17 billion is going to shareholders.

  • Only just $200 million (or $0.2 billion) is going to the company.

  • And rumours have it that shareholders are looking to exit a portion of their long-held positions.

How could this be “good” for its $40 a piece price tag ? Just hope that when KLAR falls, it does not drag AFRM (that is profitable) along. Fingers & toes crossed !

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  • Do you think KLAR will give AFRM a run for its money ?

  • Do you think AFRM will rise in tandem with KLAR if the latter soars on IPO day on speculation?

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