Affirm Holdings, the lender and payments company, is set to announce its quarterly earnings this Thursday, attracting keen attention from investors. The primary focus will be on the company's ability to sustain its impressive growth trajectory while effectively managing delinquencies.

Since its IPO in 2021, Affirm has been experiencing rapid expansion by continually onboarding new merchants and customers. In a significant move last December, the San Francisco-based company revealed plans to offer its buy-now-pay-later services at Walmart self-checkout kiosks. However, despite this growth, Affirm and its customer base have faced challenges stemming from inflation and higher interest rates. These factors have led to increased funding costs for the company.

Affirm's performance for the fiscal second quarter, which concluded in December, will be disclosed after the market closes on Thursday. Analysts anticipate a loss of 72 cents per share and sales of $520 billion for the period, according to FactSet. Notably, Affirm has exceeded revenue estimates in 11 out of the past 12 quarters, based on analysis by J.P. Morgan.

The shares of Affirm experienced a significant surge in 2022; however, they have slightly decreased by approximately 9% since the beginning of this year. As of Wednesday's close, the stock price stood at $44.61.

J.P. Morgan analysts describe Affirm as emblematic of the formerly booming buy-now-pay-later industry. Consequently, they closely monitor consumer credit trends and keep themselves updated on Affirm's product developments.

Affirm: Expanding Reach and Offering Unique Loan Products

Affirm, a company founded in 2012 and headed by CEO Max Levchin, has been steadily growing its presence in the market. By partnering with more merchants, Affirm earns a fee when customers utilize its services to purchase products and services. As of September 30, the company boasted 266,000 active merchants, a significant increase from the 102,000 recorded two years ago.

One of Affirm's notable features is the range of loan product offerings available to customers. These include the Pay-in-4 plan, which allows for short-term payment in four biweekly installments. Another option is the Core loans, consisting of monthly interest-bearing installment loans.

A standout characteristic of Affirm is its dedication to customer convenience. Unlike many other financial institutions, Affirm does not impose late fees on its customers. The company's success in managing risk lies in its use of advanced technology, data analysis, and an individualized underwriting process for each transaction.

While the overall economy remains strong and unemployment levels low, concerns have emerged regarding consumer financial strain. The Federal Reserve Bank of New York's data indicates an increase in credit card and auto-loan delinquencies of 30 days or more during the fourth quarter. Although this statistic does not signify a major problem, it does indicate a slight weakening in household balance sheets.

Investors eagerly await updates from Affirm regarding their 30-day delinquencies and any indicators of consumer stress. In the previous quarter, which ended in September 2023, the company experienced a sequential increase in 30-day delinquencies. However, thanks to adjustments made to their underwriting process, year-over-year delinquencies decreased by 30 basis points.

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