Affirm stock plunges following earnings miss, analyst downgrade

Yahoo Finance Live examines Affirm shares after reporting an earnings miss and receiving a downgrade from analysts.

Video transcript

[AUDIO LOGO]

[MUSIC PLAYING]

SEANA SMITH: Time for "Triple Play." Josh Schafer is here to talk to us about three stocks that we're watching in the final 30 minutes of trading. We have Affirm, MGM, and Canopy Growth. Kicking it off with Affirm, it's a top trender today on Yahoo Finance, shares selling off. Look at that drop, off just about 18.5% off the lows, actually, of the day. Now this drop coming after the company's earnings and revenue both missed the Street's expectations. The company also announced plans to cut 19% of its workforce, which is expected to generate savings of about $80 million.

Now, despite these cost cutting efforts, RBC downgraded the stock today, writing in a note to clients that the firm is, quote, "stepping aside until we get a clearer picture." Now they cited higher funding costs and a deceleration in consumer spending as challenges that are clearly facing this company. And, Josh, this note and this drop today comes after what was an extremely rough 2022 for Affirm and many of its peers in that sector. We'll hear from PayPal after the close today. But clearly, when consumers pull back on spending, it's not good news for these [INAUDIBLE].

JOSH SCHAFER: Yeah, and you remember, to start 2022, buy now, pay later was one of the hottest investing stocks articles you could read online, right? That was everyone's great idea for 2022 almost, it seemed like. And it just didn't go well for Affirm because we were talking about consumer spending.

I mean, you take a look at Affirm's order volume, quarter over quarter, how much people are paying per order, it was up around $550 at one point, now down all the way to $300. People are spending less per order, meaning they're kind of cutting back spending, right? They're literally just not buying as much product per volume there, Dave.

And the other thing I think that's going be interesting, too, when we talk about PayPal, they have Venmo. Apple might get into the space. It's kind of, buy now, pay later's sort of an afterthought for them. This is Affirm's core product. They need people to spend money. And I don't know if people are going to spend money at the rate that they need them to this year.

DAVE BRIGGS: Yeah, Venmo keeping afloat PayPal. But we talked to Dan Dolev from Mizuho yesterday. I asked him, is it a sector problem or an Affirm problem? And he said, truthfully, Affirm is best in class when it comes to buy now, pay later. That tells you a lot about this class, one you do not want to enroll in.

SEANA SMITH: It's an ugly class to be in right now.

DAVE BRIGGS: Ugly, yeah. Yeah, get out.