Affirm (NASDAQ: AFRM) stock price has had a strong start of the year as investors buy the dip in tech stocks. The shares have risen in the past five straight days and is trading at $12.8. It has surged by about 50% from its lowest point in 2022, giving it a market cap of over $3.7 billion. At its peak, AFRM was valued at over $30 billion, making it one of the biggest fintech companies in the world.
Is AFRM a good fintech stock?
Affirm is a leading company in an industry known as Buy Now, Pay Later (BNPL). The service makes it possible for people to shop online and in stores and then pay in equal installments. In most cases, the company charges lower interest rates than credit card companies like Visa, Mastercard, and American Express.
Affirm and other BNPL companies have had a remarkable fall from grace. For example, Klarna, the biggest BNPL player in Europe, raised cash at a $7 billion valuation, which was lower than its peak valuation of over $46 billion. Similarly, the Square has a market cap of over $30 billion, which is notable since the company acquired AfterPay in a $28 billion deal during the pandemic.
Affirm stock price has plunged for several reasons. First, the decline was mostly because of the extremely hawkish Federal Reserve. The bank moved rates from about 0% to over 4.5% in 2022. Historically, growth stocks like Affirm, SoFi, and Upstart tend to underperform in such periods.
Second, high rates made it significantly difficult for Affirm to raise cash that it uses to lend. Further, the collapse of Peloton had an impact since most bikes were bought using the network. Further, a decline in retail spending had an impact in the company. And finally, rising competition from the likes of AfterPay, PayPal, and AfterPay jumped.
Still, there is a likelihood that Affirm share price will rebound in 2023. First, the company has become undervalued. Second, interest rates will likely start to fall as the Fed works to prevent a hard landing. Further, I belive that Affirm is a good company that has a path to profitability. Finally, it is always wise to invest in quality companies when everyone is fearful.
Affirm stock price forecast
The daily chart shows that the AFRM stock price has been in a bullish trend in the past few days. It is approaching the important resistance level at $13.56, which was the lowest point on May 11. It has also retested the 50-day moving average while the Relative Strength Index (RSI) has moved close to the overbought level. Therefore, the shares will likely continue soaring as buyers target the key resistance point at $20.