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: Affirm boosts outlook but stock falls amid concerns about ‘cyclical risk’

Affirm Holdings Inc. boosted its outlook Monday as the buy-now, pay-later company said that it’s seen better-than-expected performance thus far in the March quarter.

The company now expects revenue of at least $335 million for its fiscal third quarter, compared with the prior guidance for $325 million to $335 million that Affirm

issued Feb. 10. Affirm also anticipates quarterly revenue less transaction costs of at least $148 million, whereas its prior forecast was for $138 million to $143 million.

Affirm projects that it will see gross merchandise volume (GMV) of at least $3.71 billion for the quarter, whereas its prior outlook had been for $3.61 billion to $3.71 billion. The company is also anticipating that its adjusted operating loss as a percentage of revenue will be 15% or better. The company previously had been targeting 19% to 21%.

Meanwhile, shares of Affirm were off nearly 11% in midday trading Monday, which put them on track to close at a record low. The stock has lost 74% over the past three months as the S&P 500 SPX has declined about 9%.

Bloomberg News reported late Friday that Affirm had halted a proposed sale of asset-backed securities as a major investor pulled out “due to general market volatility that may have led to wider risk premiums than the company wanted.” The report cited multiple unnamed sources.

“While we were pleased with the interest we received for refinancing the transaction and the support from the investor community for our program, in light of the heightened levels of credit spread and interest rate volatility, and consistent with our disciplined approach to navigating a volatile backdrop, we made the decision to temporarily hold off on issuing this particular transaction at this time,” an Affirm spokesperson told MarketWatch.

Though Barclays analyst Ramsey El-Assal said that Affirm’s “modest” increase to its outlook showed that its “business in on track,” he also wrote that the company’s “decision to not accept less favorable pricing on its ABS securitizations feeds into bear narratives around cyclical risk.”

Affirm noted in its Monday release that its GMV growth “remained strong, driven in particular by the company’s enterprise partnerships.” The company’s higher outlook for revenue less transaction costs reflects “outperformance in both network revenue and transaction costs, including provision for credit losses,” the company continued.

Affirm also discussed its “diversified funding strategy” in the latest release. “For example, in the current volatile market environment for pricing ABS issuances, the company’s diversified funding strategy allows it to maintain discipline by leveraging other sources of liquidity with attractive economics,” Affirm said.

The financial-technology company boosted its forecast for the full fiscal year as well. Affirm now expects revenue of $1.31 billion, whereas it had previously called for $1.29 billion to $1.31 billion. Affirm also projects revenue less transaction costs of $600 million, ahead of its prior forecast, which was for $585 million to $595 million.

Affirm anticipates that its adjusted operating loss as a percentage of revenue will be 11 percent to 13 percent for the full fiscal year. Its earlier outlook called for 12 percent to 14 percent. Affirm models at least $14.78 billion in GMV, whereas its prior forecast called for $14.58 billion to $14.78 billion.

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