This buy now, pay later stock is getting crushed. How to capitalize on the downside move
Affirm’s (AFRM) business model is being challenged by a softening labor market, declining consumer resilience and a tightening regulatory environment, directly affecting its core business of extending short-duration credit to younger and lower-income borrowers. The stock’s recent breakdown marks a decisive shift in momentum and signals the potential start of a potentially deeper corrective phase. The backdrop for AFRM is a valuation of its multiples higher than industry peers with lower profitability, meaning AFRM’s growth premium appears increasingly unsustainable. As credit normalization accelerates and funding costs remain sensitive to market conditions, the risk/reward skew has shifted materially to the downside. Trade timing & outlook AFRM’s breakdown below $70 confirms the loss of a major support level and a transition into a bearish trend. Momentum shows persistent selling pressure, highlighting the potential of institutional distribution. Sector trends have rotated away from high-valuation fintechs toward cash-flow-generating financials, increasing AFRM’s relative vulnerability. Fundamentals Affirm trades at a significant premium to its industry despite lower margins, higher capital intensity, and elevated credit sensitivity: Forward PE ratio: 78.69× vs. industry average 23.37× Expected EPS growth: 137.22% vs. industry average 12.25% Expected revenue growth: 24.82% vs. industry average 9.40% Net margins: 6.74% vs. industry average 8.65% This valuation gap assumes perfect execution and uninterrupted growth — conditions that appear increasingly difficult to meet. Our thesis Credit normalization , as BNPL borrowers skew riskier, and delinquencies may rise if the labor market further weakens. Regulatory tightening exposes AFRM and restrictions on merchant fees and loan structures, particularly under new BNPL rules. Elevated funding-cost given reliance on ABS markets, warehouse facilities and forward-flow partners, all vulnerable in a risk-off tape. Competitive intensity remains high , with Klarna, Afterpay, PayPal and card-based installments putting pressure on margins and limiting long-term pricing power. Options trade With an IV Rank of 17%, options remain reasonably priced for defined-risk bearish exposure. I’m buying the Dec 19, 2025 65/55 Put Vertical @ $339 Debit . This entails: Buying the Dec 19, 2025 $65 put @ $8.23 Selling the Dec 19, 2025 $55 put @ $2.46 Maximum reward: $661.00 per contract if AFRM is below $55 at expiration. Maximum risk: $339.00 per contract if AFRM is above $65 at expiration. View this Trade with Updated Prices at OptionsPlay . This trade provides a defined-risk way to capitalize on AFRM’s breakdown and concerning valuation. With weakening credit conditions, regulatory pressures and rising funding-costs, we maintain a downside target of $55 which remains supported by both the technical and macro backdrop. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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