AFRM has a lot of correlation with SPY and the other fintechs (and banks in general to some degree). So any upward movement is likely going to be dependent on the overall market going up (not likely) or banks having great earnings (also not likely).
However, I will gladly buy PUTS for their earnings as I think they are going to be heaping pile of garbage again. Especially with inflation and people not being able to pay bills I think the numbers on AFRM’s losses due to non-payment are going to be stacking up.
Affirm reported its Fiscal Q3 2022 results today. They reported revenue of $354.76 million (up from estimates of $344.03 million) and EPS of -$0.19, which beat estimates of -$0.50. So now they are up 27% after market and I am frothing at the mouth. Why, you ask? Puts. Here is the most important part of Affirm’s financial report this quarter:
Affirm’s reserve for credit losses (discussed in my original DD above) is up MoM to $66.2 million from -$1 million and YoY to $182 million from $40 million. What is going to happen when the growth starts to slow and credit losses keep mounting? I’m looking at September puts over the coming days when IV goes down.
Net loss was $54.7 million compared to $287.1 million in the third quarter of fiscal 2021. The improved loss was primarily driven by a gain of $136.2 million recognized in the current-year period, based on the change in fair value of the contingent consideration liability associated with the Company’s acquisition of PayBright, compared with a loss of $78.5 million in the prior-year period, driven by a decrease in the value of its common stock.
For the year ended June 30, 2022, the company expects revenue of $1.33B-$1.34B, up from its previous guidance of $1.29B-$1.31B; consensus is $1.33B. Adjusted operating loss is expected to be 6.6%-7.6% of revenue, compared with its previous range of 12%-14%. Q4 revenue guidance is $345M-$355M vs. consensus estimate of $352.9M. It expects adjusted operating loss as a percentage of revenue of 11%-15%.
It seems that their loan quality has indeed gotten worse. Which is reflected in the loan provisioning. This is the distribution of the proprietary ITACS for 2021 (pg 23) vs 2022 (pg 19):
They also securitized $500M of this; if they are holding onto the equity tranche which is the most risky, this could really bite them in the behind.
Bigger picture though, share prices have fallen 90%+. In that context a 70% bounce could be a relief rally that may still have some legs as market seems to be happy with earnings. Once it confirms a top though, would certainly consider puts for AFRM.
I sold my 11/18 AFRM 15p today for a 68% gain. I’m going to look into opening another position if AFRM tracks up with SPY in the coming days. I am still very bearish on AFRM, especially as consumer spending starts to weaken and debt starts to spike.
Kryptek noted there was a huge buy wall at $18 on Friday (Something like 700k+ IIRC sitting in the order book). Nobody could find any news, even today (Saturday) I don’t see anything new.
As pure speculation of this odd buy wall, a few of us took some calls for next week. AFRM likes to go up with SPY and if we do have a little relief rally Mon/Tue we could push to $20 - $23 depending?
However, once the market turns bearish I know that I’ll personally flip back to long-dated puts. Will be interesting to see if that buy wall is still there on Tuesday.
I was doing some support/resistance lines last night, figured I would share here. The peak today was .02 off from my line. Haven’t re-entered yet, thinking tomorrow might be a bullish day, or least half the day… We’ll see…
So was looking around a little deciding how to handle some puts I’m in that are too short dated and saw this MF article linked on Finviz-
Which got me thinking that I should have been watching retail sales for this position in particular, and probably should have even opened a short term bullish position on those good bank earnings, this thing has been up almost 10% at points this week, and it’s still just Tuesday. Going forward and looking at the chart, yesterday’s hammer of hope I held onto got fully engulfed today, the price is now well above most of it’s MA’s, but also at the top of the Bollinger. RSI is creeping up but not oversold. There is a small gap below from yesterday, but it’s all within $23, not very large.
So what I’m wondering is, how much gas is really in this tank, do we think enough to go towards the upside of a channel near 28 (maybe even 30 if things really go nuts?), and if so should we try to play that upside? I very roughly drew out the potential channel I see in blue rays on the chart below.
Another notable thing is it’s up over 2% AH, in response to NFLX earnings maybe? There’s some connection forming in my head between that ER, retail spending, and this/the other fintechs going forward Probably going to cut the August puts before EoW, hopefully there’s some pullback to take the sting out. They could have a chance, but only if a bunch of things line up and probably needing average downs too. Most likely better to roll out…still long term bearish for sure, but with the earnings now getting out of the way and showing spending is higher than anticipated, I think a summer bear case just got a little rougher to be in (it is, shorts average price isn’t much higher than $20…another consideration, would hedging/closing those positions be another possible short term upward catalyst? Not saying a squeeze, but just that little bit extra on top?)
It moves with the other Fintechs. If one of them gets good / bad news, it pulls the others with it.
It usually like to move with SPY.
Other fintechs I’m referring to: SQ, MQ, PYPL, SOFI, HOOD
Some points of support/resistance I have past my chart from above are: 23.55, 25, 26.50, 28, 30.50
I’m sure there are more but I’ve been trying to chart out other tickers.
It is entirely likely it will continue to get an artificial boost from bank earnings, but AFRM is most certainly not a bank.
I don’t know your position size or expiration, but if possible and if it makes sense, you might want to consider hedging with calls on green days.
~26.50 seems to be a popular resistance point, but with the market going stupid I think it could pump as high as 30. Past that I think would be really tough without any earnings data in the current macro environment.
Disclaimer: I still don’t have any AFRM positions. I’ve just been doing daily scalps of various tickers.
Welp, as predicted the 30.50 resistance I said above was pretty close to AFRM’s peak this week, and in fact offered two entry opportunities yesterday, and one decent one today… I was too hyper-focused on other tickers and missed those entries so I will be patient and see what this coming week’s earnings will do to the market.
Congrats to those that did jump in, or averaged down.
Thanks for that resistance call beak. I waited to average down until it hit 30 and bought a shit ton of puts. Was able to exit today with small profit. I really thought I was gonna have to take a loss on this one
Currently holding 10 AFRM 11/18 15p w/ a cost average of $2.30. My guess is that earnings season for AFRM is a revenue beat because of the all the new loans but an EPS miss due to credit losses and either neutral guidance or (if they’re being honest) poor guidance.
Probably going to cut the August puts before EoW, hopefully there’s some pullback to take the sting out. They could have a chance, but only if a bunch of things line up and probably needing average downs too. Most likely better to roll out…still long term bearish for sure, but with the earnings now getting out of the way and showing spending is higher than anticipated, I think a summer bear case just got a little rougher to be in (it is, shorts average price isn’t much higher than $20…another consideration, would hedging/closing those positions be another possible short term upward catalyst? Not saying a squeeze, but just that little bit extra on top?)
