Michael Wiggins De Oliveira
Deep Value Returns, Equity Investing without Options or Leverage
Affirm's free cash flow is exploding, making its 19x forward free-cash-flow valuation look seriously undervalued. Free cash flow is projected to reach $1.4 billion this fiscal year. The $100 target by early 2027 remains, and Affirm fits the preference for businesses that can compound intrinsic value regardless of what happens to the volatile AI trade. x.comÂ
Affirm should become an institutional favorite at 23x forward free cash flow, even with the price target cut from $140 to $100 by early 2027 as moderating growth compresses the multiple. It looks on track for about $1.1 billion of free cash flow over the next twelve months, with revenue up roughly 25% in fiscal 2027 and profitability improving. At a sub-1x adjusted PEG, it looks less like an expensive fintech than a compounder the market is too pessimistic on. x.comÂ
Affirm Holdings has a catalyst in its May 12 Investor Forum, where management is expected to set a medium-term framework covering UK expansion, rent and B2B verticals and the Affirm Card. Card GMV is up 159% with 3.7 million active holders, and Affirm is reportedly pursuing a banking license. Its Amazon partnership runs through 2031, and it landed Costco and a Stripe AI Shopping Token integration in the same week. The weekly chart is curling; the view holds while it confirms above 52.90. x.comÂ
Affirm is a bottom-fishing opportunity now that it has turned from years of losses to consistent profitability. Q2 fiscal 2026 EPS of $0.37 beat estimates, revenue rose 29.6% and GMV 36.6%, and trailing net income turned positive. Its Amazon partnership runs through 2031, Lowe's has joined, and BNPL demand should rebound as rates improve. At about 35x forward earnings and a PEG of 0.72, the stock is reasonably valued or even undervalued for its growth. x.comÂ
Affirm looks a bit expensive here, with fair value around $70 to $80, even though buy now, pay later should keep taking share from traditional credit cards. BNPL limits borrowing to when it is needed and cuts off borrowers who do not repay, lowering risk for both user and lender, unlike credit cards with large limits. Affirm is growing over 35%, and its balance account pays over 3% interest through a linked debit card that can also use BNPL. x.comÂ
Palantir's free-cash-flow growth makes it relatively more attractive as higher rates make capital more selective. Its free cash flow is now growing more than 100% year over year; the earlier case favors businesses growing free cash flow per share faster than the market. x.comÂ
Affirm's claim of a resilient consumer rings hollow because its model offers little visibility into credit risk. Like mortgage underwriters before the housing collapse, it originates and sells the loans, so it bears little risk itself. BNPL is opaque, with payments not reported to credit agencies; a survey found 41% of buyers made late BNPL payments over 12 months, against a reported 1.2% 30-day delinquency rate. Fitch assumes a 4% default rate because it is not given pool delinquency data. … Show more
