Tesla (TSLA) is a prime example of industry disruption. Those who believed in Tesla’s power to change the auto industry have seen shareholder returns in excess of 20,000 percent since the company went public. That success is based largely on Tesla’s ability to reimagine auto manufacturing and branding. Not only has Tesla created the next generation of clean energy cars and trucks – it has developed an entire ecosystem to support them.
The finance industry was ripe for disruption, and digital entrepreneurs didn’t disappoint. Companies like SoFi (SOFI) and Upstart (UPST) are expanding borrowers’ ability to obtain credit, while Robinhood (HOOD), Square (SQ), and a long list of competitors are working to make investing accessible to everyone.
Any of these disruptors may deliver impressive growth and significant returns for shareholders, but there is a standout company that some market watchers think could be the next Apple (AAPL), Alphabet (GOOG), or Facebook (FB). In fact, Kevin Paffrath, a popular YouTuber with almost 2 million subscribers to his channel, says this stock could be the Tesla of finance.
The name? A relatively new company called Affirm (AFRM). Since its January 2021 IPO, it has rapidly gained distinction as one of the most promising Fintech stocks of the decade.
Why Did Kevin Paffrath Buy Affirm?
Kevin Paffrath began his life in finance with a single real estate purchase. He bought a condemned house, renovated it, and moved in – and a career was born. He started his company, The Paffrath Organization, to buy, renovate, and rent homes. Along the way, Paffrath decided to share his tips, tricks, and best practices through his YouTube channel, Meet Kevin.
In a recent episode, Paffrath shared his enthusiasm for Affirm (AFRM). He told viewers that he had $600,000 invested, and he planned to boost that figure considerably.
He went so far as to tell his subscribers that he is “jumping up and down because this is such a phenomenal company,” and he unequivocally believes Affirm stock is a buy.
Affirm is similar to credit cards companies in one key aspect: it offers consumers the option to buy now and pay later. However, its method of delivering buy now/pay later services is based on an entirely new model – one that is very likely to be popular with consumers, because Affirm’s goal is to replace the use of credit cards in a way that is more consumer-friendly.
The use of Affirm’s platform is more affordable than most credit cards, because a majority of users pay no interest as long as they adhere to the original terms of the loan.
Essentially, when customers check out with a participating merchant, they can choose the Affirm payment option. They get an instant credit decision, which allows them to make payments on purchases every two weeks or once a month until the purchase is fully paid.
In most cases, there is an opportunity to borrow at zero percent interest, though longer terms may come with an interest charge. If borrowers need to extend the repayment period, Affirm offers that option, at which point interest charges are assessed.
How Does Affirm Make Money?
Affirm makes money from interest in situations where interest is part of the loan agreement.
However, most of its revenue comes from the fees that sellers pay for the use of Affirm’s services. Those fees aren’t new to merchants – credit cards require them, too. The difference is that merchants are likely to benefit from increased consumer spending with Affirm, as these finite monthly payments are more attractive than seemingly endless credit card balances.
Though Affirm stock didn’t trade publicly until 2021, the company has been around since 2012. It has forged partnerships to offer payment plans with a variety of companies, including popular home exercise equipment maker Peloton (PTON).
For quite some time, the Peloton partnership was Affirm’s biggest source of revenue, though by no means was it the only notable relationship. Affirm also joined forces with Shopify (SHOP) and Walmart (WMT) to offer customers enhanced payment options.
Kevin Paffrath decided to buy Affirm based on the strength of its partnerships, particularly now that Affirm has landed its most profitable partner yet. The company recently announced that it is in the testing phase with Amazon, and soon Amazon customers will be able to choose Affirm’s buy now/pay later plans at checkout.
Paffrath is convinced that Amazon’s sales will go up when customers have more time to pay for large purchases. This tends to result in consumers spending much more than they might have otherwise. Affirm will partner in Amazon’s growth, making this stock a far less expensive method of investing in Amazon’s future.
MeetKevin: Affirm Is A Top Five Stock
Kevin Paffrath said he is all in on Affirm. He told audiences during MeetKevin that Affirm is on his top five list. He mentioned that his friends have told him they haven’t seen him this excited about a stock since Tesla.
Paffrath said that his excitement is based on the fact that Affirm stock is skyrocketing without any information or guidance related to the Amazon partnership. He thinks people are going to “go nuts” for this service, because as long as they make payments on time and don’t need an extension, they will pay no interest. That’s a win over the high cost of credit cards.
On top of the Amazon partnership, Paffrath is deeply impressed by Affirm’s plans to grow and expand its product line. That, in turn, will deepen customer relationships and increase the company’s bottom-line results.
It appears that Affirm’s new products have the potential to be wildly successful if its recent introduction of a savings account is any indication. The company didn’t advertise the new option – it simply added a button on the Affirm app. Without spending a cent on marketing, Affirm accrued $300 million in savings deposits practically overnight.
Other proposed products are generating “crazy” future projections, as well. For example, in an effort to help consumers transition away from credit cards, Affirm plans a debit card that will revolutionize spending habits.
The card will permit consumers to “unbundle” basic spending – grocery shopping, dining, gas, and other incidentals. When they use the Affirm debit card, they can go onto the app and choose whether to pay in full now or buy now/pay later for each transaction.
Though Paffrath doesn’t believe all of this buy now/pay later is necessarily a smart personal financial decision, from a company perspective, it is “insanely brilliant.” Consumers are sure to spend more, which means massive growth potential.
Is AFRM Stock A Buy?
So, is AFRM stock a buy? According to Kevin Paffrath of MeetKevin, Affirm stock is absolutely a buy. Its projections are exceptional without factoring in huge wins like the Amazon partnership and the upcoming Affirm debit card.
Affirm’s monthly active users rose dramatically in the most recent quarter, and that will increase exponentially when the service is fully rolled out on Amazon (AMZN). Meanwhile, the average ticket price or the cost of purchases consumers are using buy now/pay later for is going down. That’s a plus for Affirm, because it means greater usage – perhaps Affirm isn’t just for big-ticket items anymore.
The bottom line is that all indications point to the fact that AFRM stock is a smart buy.
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.