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Affirm’s stock has experienced a significant drop of nearly 30% within just two trading sessions, marking a potential conclusion to the company’s second-worst week in its history. This downturn follows President Donald Trump’s major tariff decision announced on Wednesday.
The implications of widespread tariffs could pose a significant challenge for Affirm, given that the buy now, pay later (BNPL) lender is heavily dependent on consumer spending. Economists predict that tariffs will lead to increased prices across various goods, further straining consumer budgets. The situation worsened when Affirm’s competitor, Klarna, announced the postponement of its highly anticipated initial public offering (IPO), citing the heightened market volatility.
Klarna was set to enter the New York Stock Exchange under the ticker KLAR, aiming for a valuation of approximately $15 billion. In contrast, Affirm’s market capitalization currently stands at around $11 billion. For context, Klarna generated $2.81 billion in revenue last year, a figure equivalent to Affirm’s total revenue over the past four quarters.
Moreover, concerns about the IPO market were exacerbated when StubHub announced it would not proceed with its planned share sale. Reports also emerged indicating that Chime is delaying its own IPO filing with regulators, further suggesting a challenging climate for new public offerings, as detailed in a report by The Wall Street Journal.
This week, the Nasdaq has fallen more than 9%, positioning it for its largest weekly decline since the onset of the Covid-19 pandemic in early 2020.
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These developments mark a striking reversal for the BNPL industry, which had seen investor enthusiasm surge toward the end of 2024. In November, for instance, Affirm’s shares climbed by 60%, coinciding with the month that Trump was elected. Similarly, Jack Dorsey’s Block, which owns Afterpay, experienced a 22% increase in its stock price that month but has since seen a 9% decrease this week.
Sanjay Sakhrani, a senior analyst at KBW, commented on these trends, explaining, “When you go down the spectrum, that’s when you have more cyclical risk and more exposure to tariffs. That’s where you see a lot more weakness.”
James Friedman, an analyst at SIG, highlighted Affirm’s vulnerability due to its exposure to sectors like fashion, beauty, and travel, which typically suffer the most during economic downturns. Approximately 42% of Affirm’s transactions occur in general merchandise, with fashion and travel accounting for another quarter of its transaction volume.
A representative from Affirm chose not to provide comments on Klarna’s delay. Referring to the overall market volatility, the spokesperson emphasized that the adoption of Affirm’s flexible products, which provide alternatives to traditional credit cards, reflects a long-term trend that persists across different market cycles.
Affirm affirmed, “We underwrite every transaction before making a real-time credit decision and enable consumers to pay over time without any late or hidden fees.”
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