Affirm's GMV Poised for Growth on an Expanding Merchant Base

Affirm Holdings (AFRM) reports strong growth in its Buy Now, Pay Later (BNPL) business, expanding its active merchant network to 358,000 and projecting fiscal 2025 Gross Merchandise Volume (GMV) to reach $35.7-$36 billion, a 34.8% year-over-year increase at the midpoint. Despite losing Walmart's exclusive BNPL partnership, Affirm is offsetting this with strategic international expansions, including Shopify's Shop Pay Installments in Canada, and new industry-specific tie-ups. The company's shares have surged 132.1% in the past year, underpinned by strong revenue and earnings growth estimates for FY25 and a favorable valuation relative to industry peers, indicating continued momentum in the competitive BNPL landscape.

Analysis

Affirm Holdings (AFRM) is demonstrating significant operational momentum, characterized by rapid expansion of its merchant network and strong growth in Gross Merchandise Volume (GMV). The company's active merchant base grew to 358,000 as of March 2025, a notable increase from 292,000 in the prior year. This expansion is fueling GMV, which climbed 36% year-over-year to $26.3 billion in the first nine months of fiscal 2025, with full-year guidance projecting a 34.8% rise at the midpoint. Strategically, Affirm is mitigating the significant loss of its exclusive partnership with Walmart by pursuing aggressive international expansion, notably with Shopify in Canada, and by diversifying into new verticals such as auto repair and gaming. While facing formidable competition from established players like PayPal and high-growth peers like Sezzle—whose GMV rose 64.1%—Affirm's financial outlook remains strong. The stock's 132.1% surge over the past year is supported by consensus estimates for a 101.8% improvement in fiscal 2025 earnings and 37% revenue growth. Furthermore, its forward price-to-sales ratio of 5.61 sits just below the industry average, suggesting its valuation has not outpaced its fundamental growth prospects.

Key Decisions for Investors

• Investors should consider Affirm's robust top-line momentum, driven by a 36% year-over-year increase in GMV and strategic merchant acquisitions, as a primary indicator of its ongoing growth potential.
• It is critical to monitor the company's ability to offset the loss of the Walmart partnership through its international expansion with Shopify and new vertical integrations, as this will determine its capacity to sustain high growth rates.
• Despite the stock's 132.1% appreciation, its forward price-to-sales ratio of 5.61 remains below the industry average, potentially offering a reasonable valuation for investors confident that Affirm can meet its strong fiscal 2025 earnings and revenue growth forecasts.