This strategy has allowed the company to extend around $3.91B of loans for FQ3'22, which indicated a more-than-healthy growth in the company's business thus far. Much of AFRM's long-term debts include funding debt, convertible senior notes, and revolving credit facility. In the meantime, AFRM's net PPE assets and capital expenditure continue to grow to $194.1M and $67.1M in the LTM, representing a massive increase of 403.5% and 319.5% from FY2020 levels, respectively. By the LTM, the company reported long-term debts of $4.09B, representing a massive increase of 486.9% from FY2020 levels. The company would need to further rely on long-term debts for its expanding operations moving forward.
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Therefore, it is evident that AFRM has yet to report positive Free Cash Flows (FCF) thus far, with -$190.1M of FCF and -15.2% of FCF margins in the LTM. Given AFRM's rate of expansion and growth in partnership, we expect the company to remain unprofitable for the next few years, prior to reaching an inflection point in the next five (or so) years. It also represented a gargantuan increase of 446.6% from FY2020 levels, indicating the company's current growth-at-all-cost stage. The lack of profitability could be attributed to AFRM's aggressive increase in operating expenses in the past two years, with a total of $1.2B reported in the LTM, representing 160.2% of its revenue then.
Nonetheless, despite the windfall, AFRM has struggled with profitability thus far, reporting net incomes of -$634.3M and net income margins of -50.9% in the LTM, representing huge decreases of 563.3% and 28.8 percentage points from FY2020 levels, respectively.
By the LTM, the company reported excellent revenues of $752.9M and record gross margins of 50.2%, representing massive improvements of 233.2% and 18.6 percentage points from FY2020 levels, respectively.
It is evident that the COVID-19 pandemic has been good for AFRM, given the tremendous growth in its revenue in the past two years. AFRM Continues To Expand Its Capabilities And Debts At The Same Time In the meantime, sell for existing investors. Speculatively, we believe the AFRM stock has more to fall to $10s over the next two quarters, which may prove to be a more attractive entry point then. Therefore, anyone looking for a swift stock recovery would be sorely disappointed since the S&P 500 Index had fallen by 21.8% by H1'22, with analysts predicting either another plunge of 22% or a steep rebound of 24% by the end of the year. Akin to the average Joe relying on BNPL to purchase their Peloton bikes during the COVID-19 pandemic hype then.Īnyhow, we expect more downwards pressure on AFRM's stock performance, given the rising inflation tightening discretionary spending and the potential recession. It is apt since AFRM would need to further rely on more debt in order to finance its expanding operations and partnerships moving forward. ( NASDAQ: AFRM) remains a highly speculative fintech stock since its IPO, given its historically elevated trading valuations and its lack of profitability for the next few years.
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