Affirm Stock Analysis in 5 Minutes - YouTube

is a firm a good investment we'll  tell you everything you need to know  

in about five minutes my name is Brian  Feroldi and my name is Brian Stoffel  

we recently did an hour-long deep dive into  a firm what does this company do the most  

important thing to know about a firm is that they  are a buy now pay later company so you could go  

to an e-commerce website buy something usually  that's relatively expensive and as you can see  

they're choose to pay it off over 3 6 or 12 months  importantly a lot of these are zero interest loans  

but it's important to point out that the company  really makes money in a couple different ways one  

is through these buy now pay later transactions  but they also offer analytics to the merchants  

themselves that help them increase their sales and  they do have some loans that they earn interest on  

what i found interesting about this company  is that while buy now palliator is the primary  

thing that it's known for there's more to this  company than just that feature so they also  

offer a marketplace where big companies can go  to and market to affirms millions of customers  

they've been rolling out new products as well  like a debit card and that debit card increases  

the stickiness of a firm's products they also  recently rolled out a rewards program that  

merchants can sign up to in order to incentivize  more purchases on their platform and while it's  

not available yet the company does plan on rolling  out a cryptocurrency platform very soon if you  

look at the numbers a firm has been growing  really fast gross merchandise volume or the  

value of all the things that are being bought  using a firm is growing at about 78 per year then  

if you go all the way over to the right because  it's a clear indication of how the company is  

doing when you take all their revenue and subtract  out the transaction costs that are part of the  

business model their revenue is growing at an  astounding 182 percent per year over the last  

two to three years so what's the bold case for  investors moving forward well number one the  

growth here has been incredible and there's plenty  of signs that buy now pay later trend is still  

in its infancy number two it's clear that in north  america at least the brand that a firm has built  

is very recognizable that's important but also the  network effect is starting to take shape as more  

people use a firm more merchants are motivated to  accept a firm which only draws in more users and  

it is a virtuous cycle that continues to compound  upon itself third the founder ceo is exactly the  

type of person you want to bet on max levchin not  only owns a lot of stock not only has made a firm  

a great place to work but he was also one of the  co-founders of paypal this isn't his first time  

being involved in a high growth company focused  on fintech so that is wonderful to see if you're  

an investor but let's dig into what the bear case  is here as well the first thing that we need to  

know about is concentration risk historically  peloton has accounted for a rather large chunk  

of the transactions that take place using a firm  that's come down a bit but it's also important to  

note that the company announced a partnership  with amazon while that is very exciting that  

partnership hasn't started yet and once it does  it's possible that business is so big with amazon  

that that emerges as a concentration risk moving  forward two we don't really have a true sense of  

what delinquency rates would be this company  was only founded a few years ago and it only  

has gone through the covet 19 recession during  that time period the government was handing out  

stimulus checks like crazy so it's possible that  the company's historic delinquent rate might not  

be an accurate representation of what happens  to this company when the economy takes a turn  

for the worse and finally while it's clear that  a firm is the leader in north america this is a  

very popular trend in a very crowded space  globally and so it remains to be seen what's going  

to happen when a firm bumps up against some of the  other competitors that are located in different  

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all right let's see how this company scored on our  checklists on my checklist this company got a 63  

which is in my why bother category now importantly  my checklist punishes companies that are new to  

the public markets as a firm in and while i think  that the potential is there the management team  

is excellent and the moat is certainly there the  company is nowhere close to producing free cash  

flow or profits and that's one big reason  why i didn't score as well in my checklist  

my checklist doesn't penalize companies the same  way yours does that being said that eight and  

a half could have been a lot higher if it wasn't  for the concentration risk and those same balance  

sheet risks that have me a little bit concerned  as well so what should investors watch moving  

forward first thing they should keep an eye on is  delinquency rates historically the firm's numbers  

have performed very well and its consumers have  almost always repaid their loans but we don't know  

if that trend is going to continue indefinitely  it will be especially telling to see what happens  

to this company's numbers once a real recession  hits second we want to see how well those new  

products are taken up the marketplace the rewards  program the crypto platform if those can catch on  

that would be really positive for the company  in terms of making its products even stickier  

third keep an eye on the bottom line we want to  see this company eventually generate free cash  

flow and net income while that's still likely  to be a few years out if the company can get  

there its score on my checklist will jump  substantially overall i think that both you  

and i were more impressed with the firm than we  thought at the beginning and if you want to watch  

the entire deep dive video click the link that you  see on your screen thanks for watching brian's out