Affirm Valuation

Dear Reader,

Affirm holdings or shortly Affirm is a financial technology firm that provides loans to consumers at the point of sale which can be financed later. Affirm claims consumers are not charged hidden fees or compound interest.

Affirm completed an IPO on Nasdaq on the 13 of January or last Wednesday. 

Affirm states in its IPO filing: "For the fiscal years ended June 30, 2019 and 2020, our revenue was approximately $264.4 million and $509.5 million, respectively, representing year-over-year growth of approximately 93%. We incurred a net loss of $120.5 million and $112.6 million for the fiscal years ended June 30, 2019 and 2020, respectively. For the three months ended September 30, 2019 and 2020, our revenue was approximately $87.9 million and $174.0 million, respectively, representing year-over-year growth of approximately 98%. We incurred a net loss of $30.8 million and $15.3 million for the three months ended September 30, 2019 and 2020, respectively."

Currently Affirm Holdings is valued at 28.4 billion USD by public markets. I estimate the intrinsic value of Affirm is around 20 billion USD based on the assumption that in 2021 Affirm achieves 1 billion USD revenue and its negative net profit margin is below 15 %. As can be seen from the IPO filing quote in the last reported quarter Q3 2020 Affirms negative net profit margin of -8.8 % which for a fast growing technology company is a very good achievement.

Actually, if the Nasdaq Composite grows in 2021 by around or more than 20 % the intrinsic value of Affirm could rise to 40 billion USD or Price/Sales ratio of 40 or 40 times Affirm's projected 1 billion USD sales in 2021.

Earlier 20 times Price/Sales was the 'normal' ratio of loss-making, fast growing technology companies. Now at the current hyper growth rate of the Nasdaq Composite the new normal value metric for fast growing technology companies seems to be 40 times Price/Sales.

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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

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Respectfully yours,

Petar Posledovich