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Affirm stock plunges after posting wider-than-expected earnings loss

Yahoo Finance Live anchors discuss fourth-quarter earnings for Affirm.

Video Transcript

JULIE HYMAN: All right, let's get back to the movers here for a moment. Speaking of jumping--

BRIAN SOZZI: The media pass--

JULIE HYMAN: Something that is very much not jumping, by the way-- yeah, well, we'll see. It's down 12%, Affirm is what we're talking about, away from something not quite so happy here this morning, as Brian Sozzi cracks himself up for the-- let's keep a count of how many times he does that today.

Affirm reporting a wider than expected loss for its fourth quarter. Buy now, pay later company also reporting revenue guidance for the first quarter, as well the full year of 2023. Both of those coming in under what Wall Street had been anticipating. For example, for the full year revenue of as much as $1.73 billion, $1.91 billion here was the estimate.

And some of that may have been down to sort of tightening lending standards on the part of Affirm, that it is being sort of very conservative with its lending that it's doing. And that's something that some of the analysts point out, that this is a company that tends to be conservative with its guidance. But even by their standards, this is conservative.

BRAD SMITH: Yeah. I mean, the transactions growth for the quarter was extremely significant, 139% total transactions growth. They saw that come in at about 12 million for the quarter. And then additionally, you think about the active merchants that they work with. That also increased from 29,000 to-- get this-- 235,000. And Shop Pay installments really driving some of that new merchant activity that they had seen on the platform too based on Shopify's platform.

BRIAN SOZZI: Yeah. I'm looking at some commentary from Jefferies, maintaining an underperform rating, price target $15. And again, there's my icon just hanging out in some of the takeaways here. But Jefferies noting higher operating expenses, worsening credit, and mediocre guidance may be seen negatively for the quarter.

And I think wha you're seeing here with the stock reaction with Affirm is, sure, acknowledging that, yeah, they grew sales almost 40%, but can they reach profitability sometime over the next 12 months, as they have suggested? The move in the stock suggests that may not happen.

BRAD SMITH: Yeah. And the executives have acknowledged that. Levchin saying, while the growth of online commerce is falling back to pre-COVID levels here, secular trend towards adopting financial products, they're saying right now, is gaining momentum. But I think that online commerce that many of us had become either accustomed to as shoppers or just tracking the trends of the number of people that were going into an Instagram experience or into a YouTube or any social medium and making a purchase decision based off of that, less screen time, less of those purchases happening.

And so now what takes place when you have less of that actual volume that's going to be coming through foreseeably here? And that, the company has to acknowledge in the near term.

JULIE HYMAN: At the same time, just one quick note. The company did stick with its forecast for a sustained run rate of profitability by the end of fiscal 2023. So we'll see if the conditions change enough for them to change that outlook.

BRAD SMITH: Indeed.