If you’ve ever caught one of this YouTuber’s videos, you know it immediately by the energetic theme music and his recurring opening intro, “Hey, Meet Kevin here.” What follows are the opinions, advice, of Kevin Paffrath on topics that range from equity to real estate to cryptocurrency investing.
While his channel started out as a way to teach other everyday Americans how to buy and sell real estate, many viewers first discovered him through his videos that closely followed the government stimulus plan and subsequent bills throughout 2020.
Who is Kevin Paffrath and what stock is he betting 7 figures on?
Meet Kevin’s Kevin Paffrath
Kevin Paffrath became a real estate agent at the age of just 19, buying his first home that same year, followed by additional rental properties. At 21, he became a broker, earning self-made millionaire status and a current net worth of more than $20 million.
He’s earned his YouTube following (1.71 million subscribers and growing) by offering timely and straightforward advice regarding real estate, stock market investing, and his own courses in both disciplines.
Meet Kevin Stock Picks: Affirm
Kevin’s latest advice regarding investing is about new buy-now-pay-later (BNPL) company, Affirm. He’s impressed. Should you be?
Affirm (AFRM) says its goal is to keep consumers “out of unhealthy debt” by offering a payment solution that lets them pay for the products they want in easy-to-manage installments without late fees and, if paid off according to agreement, without interest fees.
Affirm currently offers their BNPL plan to a wide range of customers, including:
The company aims to help consumers rely less on credit cards and hopefully replace credit cards altogether. Is it a massive market opportunity?
You bet.
In fact, overall, the entire buy-now-pay-later premise may cause future trouble for credit card companies, thanks to the BNPL placement within the purchase cycle.
Meet Kevin’s take? Affirm is “the Tesla [TSLA] of finance,” he said in a recent video. “More so than SoFi [SOFI],” he added.
Affirm (AFRM) works like this:
- Customer clicks Pay with Affirm.
- Affirm conducts a credit check.
- Based on the customer’s credit score, Affirm offers BNPL financing with 0% to 30% interest. By charging interest, the company negates charging late fees – another aspect that makes it attractive to the typical consumer – the price they see upon checkout is exactly what they’ll pay.
“Affirm Is The Tesla of Finance” Kevin Paffrath
Kevin invested $600,000 in AFRM when the stock was just $40 per share – and he claims he will double that investment.
There are several aspects of Affirm’s business model that Kevin finds particularly appealing, such as:
- 0% interest to consumers
- Transparency at all levels of the transaction
- Savings account
Affirm is aiming to disrupt credit cards entirely. As long as you make payments in a timely fashion you can potentially avoid interest charges altogether with a buy now pay later approach.
Affirm can also raise cash easily without paying a dime of interest with a simple in-app pop-up. By enabling consumers to create a savings account, Affirm raised $300 million in cash virtually overnight.
Add to the fact it cost Affirm nothing to advertise these additional services makes it clear the company has a ton of future revenue potential – and this doesn’t even take into account projected earnings for future product releases.
Plus, that partnership with Amazon? It’s not even being counted as part of Affirm’s revenue estimates yet, meaning the stock has even more incredible growth potential. But more on that in just a moment.
Affirm Has a Competitive Advantage
Like other BNPL companies, Affirm focuses on the merchant rather than targeting consumers directly. Merchants that want to partner with Affirm integrate with the platform, offering the merchant’s customers a finance option at checkout. By empowering customers with better buying power, merchants see higher sales.
After a customer completes the purchase using Affirm, the merchant is paid and Affirm assumes credit risk. The company generates revenue by charging interest (0-30%) depending on the customer’s ability to repay the loan in the specified time frame and his or her creditworthiness.
But because of its newness, the BNPL industry is evolving fast. Smaller companies have also adopted the payment method, triggering Affirm to create its own digital credit-type “card” that allows consumers to bring the flexibility of Affirm’s BNPL benefits anywhere they shop online – not just with the company’s current partners.
Affirm Could Change the Game
Affirm currently has just over 7 million customers totaling $8.3 billion in financed sales in the past 12 months.
With Shopify (SHOP) and Amazon (AMZN) partnerships, this opens access to 318 million consumers. Shopify’s annual merchant sales of $151.5 billion and Amazon’s $443.1 billion – you can see how Affirm’s profit potential is stellar.
Skeptics argue the company is posting losses, but the reality is it’s growing fast and investing heavily in order to capture a huge market opportunity that will be awfully difficult to disrupt. Once Affirm is embedded in a checkout order page, a merchant will experience friction switching to a competitor like Klarna.
Most Recent Affirm Earnings Report
On the company’s full FY 2021 earnings call reported September 9, 2021, reporting sent the stock into the stratosphere with a 30% increase. (The Amazon and Apple partnership announcements jumpstarted the AFRM share price by over 80% from its lows in August.) Affirm’s bullish guidance is making analysts rethink their forecasts.
And what about the merchants?
The value add of including a BNPL options is enormous:
- It widens the customer base
- Attracts new customers
- Increases total amount per purchase
It’s still relatively early for the BNPL industry as a whole, but Affirm isn’t the only company solidifying its name – there are others like Klarna (pre-IPO valuation of around $45 billion) and AfterPay (AFTPY).
Is Affirm Stock a Buy?
As promised, what about all that potential future revenue the partnership with Amazon is bound to generate? The company excluded that from FY 2022 estimates.
As well as AFRM stock is doing, its enormous growth potential hasn’t even been considered fully.
FY 2021 Q4 revenues were up over 70% from the previous year – to nearly $262 million. Causing the jump?
- GMV increase of 106%
- GMV totaled $2.5 billion
- Merchant partnerships increased 412%
- Merchant partnerships total almost 29,000
- Consumers actively using Affirm grew to 7.1 million
Again, not counting the Amazon partnership, Affirm’s management expects revenue growth of 35%, or $1.17 billion.
Investing is always a personal decision, but Kevin Paffrath says this one is exciting.
That’s affirmative.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.