3 Red Flags for Affirm Holdings' Future

Affirm Holdings (NASDAQ: AFRM) was one of the hottest initial public offerings of 2021. The buy now, pay later (BNPL) services provider went public at $49 per share last January, started trading at $90.90, and closed at an all-time high of $168.52 last November. But today, its stock trades at about $20.

The stock tumbled as investors fretted over its widening losses, rising leverage, and the long-term sustainability of the BNPL business model. Rising interest rates, which sparked an exodus from the market's pricier and unprofitable growth stocks, exacerbated that sell-off.

Contrarian investors will point out that analysts still expect Affirm's revenue to increase 54% in fiscal 2022 (which ends this month) and grow another 42% to $1.9 billion in fiscal 2023. Based on those estimates, the stock still looks pretty cheap at just three times next year's sales. Unfortunately, three bright red flags could prevent it from recovering anytime soon.

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Source Fool.com