Affirm added to ‘zombie’ stocks list by equity research firm New Constructs

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Buy now pay later operator Affirm has been added to the list of ‘zombie’ stocks compiled by impartial equity research firm New Constructs.

The research firm, which makes use of system studying and herbal language processing to parse company filings and style financial profits, warns there are many demanding situations forward for Affirm Holdings Inc.
AFRM,
-6.20%
.

“Affirm’s stock is at risk of declining to $0 per share as both the company and broader payments industry face significant headwinds,” wrote New Constructs CEO David Trainer, in a remark. “The idea of ‘buy now, pay later’ may have sounded plausible during a low interest rate and easy money environment, but as the Federal Reserve raises interest rates and recession risks loom, we believe investors should avoid Affirm’s stock.”

See Now: Affirm stock heads higher as company notches BNPL deal with Amazon in Canada

Shares of Affirm have fallen 80.3% this 12 months, outpacing the S&P 500 Index’s
SPX,
-0.36%

decline of 21.2%. The bills corporate, at the side of different Fintech stocks, additionally took a hit not too long ago after the August consumer-price index showed a surprise monthly increase.

New Constructs put Affirm in its ‘danger zone’ in October 2021, and cites the corporate’s money burn as a topic. “Since fiscal 2020 (fiscal year ends in June), Affirm has burned through $3.4 billion in FCF excluding acquisitions,” wrote Trainer. “The cash drain at Affirm isn’t slowing as the company burned through $1.5 billion in FCF in fiscal 2022. “

“Even with $1.3 billion in cash and cash equivalents at the end of fiscal 2022, Affirm’s cash balance can only sustain its 2022 cash burn rate for another 10 months or until April 2023,” Trainer added.

See Now: Fintech stocks Upstart, Affirm, Block hit hard in market rout as persistent inflation continues

The corporate had nearly $1.5 billion in money and money equivalents on the finish of fiscal 2021.

“Raising additional capital to fund this cash-burning business would likely come at a high cost, especially as consumers come to grips with the pitfalls and harms of buy now pay later (BNPL) platforms,” wrote Trainer. “Affirm’s severe cash crisis, along with competitive challenges, puts the company’s stock at significant risk of declining to $0 per share.”

New Constructs additionally issues to intensifying festival from the likes of Apple Inc.
AAPL,
-0.27%
,
which entered the BNPL house previous this 12 months.

‘Robbing Peter to pay Paul’: Apple is the latest company offering a buy-now-pay-later option. Here are 4 reasons you should think twice before signing up.

“Affirm’s hyper growth is slowing, as competitors increase their offerings and giants such as Apple (AAPL) enter the BNPL market,” wrote Trainer. “Bulls could argue in the past that Affirm’s spending was necessary to grow market share, but as time passes, it’s clearer each day that there is no differentiation between all the BNPL businesses, except, maybe, who loses more money.”

At the top of June 2022 Affirm had round 14 million lively consumers, 235,000 lively traders, and a gross products quantity of $15.5 billion. The corporate’s inventory rose ahead of marketplace open on Thursday after it announced that Amazon.com Inc.
AMZN,
-0.81%

will use its fee choice for patrons in Canada. The inventory then pulled again, falling 6.7% throughout afternoon buying and selling.

Other firms on New Constructs’ zombie stocks list come with AMC Entertainment Holdings Inc.
AMC,
-8.37%
,
GameStop Corp.
GME,
-6.87%
,
Snap Inc.
SNAP,
-2.90%
,
Rivian Automotive Inc.
RIVN,
-4.17%
,
 Robinhood Markets Inc.
HOOD,
-1.61%
,
 Carvana Co.
CVNA,
-10.99%
,
 Freshpet Inc.
FRPT,
-2.40%
,
 Peloton Interactive Inc.
PTON,
-4.03%
,
Beyond Meat Inc.
BYND,
-6.09%
,
Chewy Inc.
CHWY,
-3.75%
,
DoorDash Inc.
DASH,
-4.67%
,
Uber Technologies Inc.
UBER,
-5.27%
,
Shake Shack Inc.
SHAK,
-8.35%
,
Tilray Brands Inc.
TLRY,
-5.54%
.

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Of 19 analysts surveyed by FactSet, 9 have an obese or purchase score on Affirm, seven have a hang score, and 3 have a promote score.

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