Editor’s Note: This story was updated to include a response from Affirm regarding the short report.
Affirm Holdings Inc (NASDAQ:AFRM) stock has been ripping higher, returning investors about 30% over the past year. Analysts have price targets suggesting at least 30-40% upside, and retail optimism is building — but Kerrisdale Capital says the entire rally is built on a familiar and dangerous illusion.
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In a sharply worded short report, Kerrisdale branded Affirm a “Buy Now, Cry Later” story, arguing the BNPL leader is following the same subprime credit playbook that has burned lenders for decades. The stock may look unstoppable today, up about 3% by 10 AM on Wednesday, but the firm warns that the downside risk is being dramatically underestimated.
Scale Without Quality
Kerrisdale’s core argument is that Affirm’s explosive growth masks deteriorating credit fundamentals. GMV has surged at a roughly 30%+ compound rate since 2022, but the short seller says that growth is being driven by increasingly aggressive lending to weaker borrowers — often at eye-watering interest rates.
According to the report, Affirm’s average loan yields now sit north of 30%, with a meaningful portion of revenue tied to high-APR products. Kerrisdale argues that this isn’t “democratizing credit,” but rather leveraging financially fragile consumers — a strategy that works until it suddenly doesn’t.
In a response to Benzinga, Affirm declined to comment on the report, referring to its company fact sheet.
A Balance Sheet With Little Margin For Error
The short thesis gets more uncomfortable when it turns to risk management. Kerrisdale estimates Affirm is levered roughly six times, while loan loss reserves sit at just 1%–2% of GMV. That cushion looks thin against a business where normal loss rates can run closer to 6%–7%.
If labor markets soften and delinquencies rise, Kerrisdale argues the math could turn quickly. Growth would stall, credit costs would surge, and the path to sustained profitability would disappear.
The Valuation Cliff
At current levels, Kerrisdale sees little room for disappointment. In a stress scenario, the firm argues Affirm could trade closer to book value — implying dramatic downside from today’s price.
With earnings due Feb. 5 and political scrutiny of high-interest credit intensifying, Affirm is heading into a binary stretch.
Photo: Shutterstock
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