Affirm's Rising Loan Delinquencies Could Be a Problem for the Stock
You may know Affirm Holdings (NASDAQ: AFRM) as a fintech company that facilitates "buy now, pay later" loans. It isn't just a middleman, though, connecting consumers with lenders. The company is also a lender itself, holding $2.5 billion worth of loans on its books as of the end of June. That was up by 25% from the $2 billion loan portfolio it was sitting on a year earlier. To this end, interest income of $528 million accounted for nearly 40% of the $1.35 billion in revenue that Affirm booked in its recently ended fiscal 2022. In other words, its lending activities are about as meaningful to its finances as transaction fees are.
That's a potentially growing problem. As the company's own loan portfolio expands, its quality is deteriorating. Indeed, 30-day delinquencies are nearly as high as they've ever been for Affirm, including in early 2020 after the COVID-19 pandemic struck.
The risk that this trend will continue is far too big for current and prospective shareholders to ignore, particularly with the growing threat of sustained macroeconomic turbulence.
Source Fool.com
