Affirm is one of the stocks that’s recently been caught in the crossfire of a broader market selloff. This volatility follows President Donald Trump’s announcement of a new round of tariffs targeting America’s key trading partners. With the economic outlook now more uncertain, investors are naturally wondering: is Affirm stock a buying opportunity at current levels, or should it be avoided due to the escalating macroeconomic risks?
In this breakdown, I’ll walk you through a comprehensive analysis of Affirm’s business and how it could be affected by the new trade policy developments. I’ll also share my proprietary valuation model and intrinsic value calculation, and assess Affirm’s valuation using the forward price-to-earnings ratio. Ultimately, we’ll try to answer the core question: is Affirm stock a good buy right now, given the shifting risk/reward landscape?
Current Valuation Snapshot
As of today, my intrinsic value calculation for Affirm comes in at around $77 per share, using my proprietary discounted cash flow model that accounts for long-term growth potential, cash generation, and macroeconomic headwinds. That’s more than double its current trading price of approximately $36 per share.
To put this in context, Affirm's stock has dropped over 8% just today. Its 52-week high was $82, while its 52-week low was $22. That means it’s currently hovering near the bottom of its trading range—a reflection of how nervous the market is about the economic outlook.
So why is the market punishing Affirm so aggressively? Let's unpack the core concerns.
How Tariffs May Impact Affirm’s Business
Affirm operates in the Buy Now, Pay Later (BNPL) space—a business model that’s extremely sensitive to macroeconomic cycles, consumer confidence, and credit conditions. When times are good, people spend more freely, and BNPL services thrive. But when economic activity slows, the entire business model is at risk. Here’s how tariffs play into that dynamic.
1. Increased Default Risk
The most immediate and serious threat to Affirm’s business is the potential increase in loan defaults. If the tariffs reduce overall economic activity—as they historically tend to do—that could lead to higher unemployment. And when people are out of work, they have to prioritize their spending.
Let’s be honest: when it comes to financial obligations, most people will prioritize paying their mortgage or car loan over a short-term installment plan for consumer electronics. That puts Affirm squarely in the high-risk category. Its core customer base could become more financially strained, increasing the likelihood of missed payments.
2. Tightening of Credit Markets
There’s also a second-order effect here. Affirm doesn’t just hold loans on its own balance sheet—it sells many of them to third-party institutional lenders. But in times of uncertainty, those lenders tend to pull back. Risk tolerance drops. Even before default rates rise, demand for Affirm-originated loans may fall simply because lenders become more selective.
That means Affirm faces a decision:
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Hold more loans itself, which increases its exposure to credit risk and ties up capital, or
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Pull back on originations, reducing growth, customer acquisition, and fee revenue.
Both paths put downward pressure on revenue and profitability.
3. Consumer Spending Pullback
Tariffs lead to higher prices for imported goods, which are often passed on to consumers. This reduces discretionary spending. And since Affirm’s business revolves around consumer spending on things like electronics, fashion, and luxury goods, lower demand directly hurts transaction volume and new customer onboarding.
Recession Risk: Rising Fast
Before the tariff announcements, my macroeconomic forecast pegged the probability of a U.S. recession in 2025 at under 20%. In light of the tariff news, I’ve revised that forecast upward to around 30–40%, depending on how businesses and consumers respond in the next few quarters.
Tariffs function as a tax on the economy. They raise input costs for businesses, who then either:
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Accept lower profit margins, or
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Pass on costs to consumers.
Most businesses can’t afford to absorb the hit. They’ll raise prices. And when prices go up, consumers buy less. That, in turn, slows production, reduces hiring, and may even lead to layoffs. It’s a ripple effect, and it puts cyclical consumer-lending businesses like Affirm in a tough spot.
Is There a Silver Lining?
While the risks are significant, there are a few potential counterbalancing forces at play:
1. Higher Average Loan Amounts
As prices rise for big-ticket items—smartphones, gaming consoles, and electronics—consumers may borrow more per transaction. That could increase Affirm’s total loan volume and interest income, even if the number of transactions dips.
But let’s be clear: I don’t believe this modest tailwind will fully offset the larger macro pressures—like reduced overall demand and tighter credit. It’s a partial counterweight, not a full solution.
2. Valuation Advantage
This brings us back to valuation. While the business outlook is murkier than it was a few months ago, Affirm’s valuation has dropped sharply.
At today’s prices, you’re getting Affirm at a forward P/E ratio of around 45, which is close to the lowest it’s been since early 2024. That’s a significant discount for a company with long-term growth potential, especially in a world increasingly shifting toward digital and flexible financing options.
Final Verdict: Is Affirm a Buy?
So, what’s the bottom line?
There’s no sugarcoating it—Affirm is facing real headwinds. The new tariffs are a material negative for the business. They increase default risk, slow down originations, and reduce consumer demand. In that sense, I do not believe the market overreacted. The pullback is largely justified by the new economic reality.
However, from a long-term investing standpoint, the stock now offers a much better risk/reward tradeoff than it did just weeks ago. You're buying a company that, while challenged in the short term, is deeply undervalued based on intrinsic value and trading near multi-year lows on a P/E basis.
Personally, I preferred the business fundamentals before the tariff announcement. But at these lower prices, I still like Affirm as a long-term opportunity. The stock has become more attractive on valuation, even as the risk profile has worsened. For long-term investors with a higher risk tolerance, this could be a rare chance to buy a strong brand at a steep discount.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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