After incurring wild swings since its public market debut in 2021, shares of financial technology (fintech) company Affirm (NASDAQ:AFRM) jumped higher thanks to a payment option partnership with e-commerce giant Amazon (NASDAQ:AMZN). Following the news early Wednesday morning, AFRM stock popped up around 8%.
According to the accompanying press release, eligible U.S. merchants offering Amazon Pay can now seamlessly integrate Affirm’s Adaptive Checkout as a payment option for their customers. This deal enables Affirm’s pay-over-time technology — also known as buy now, pay later (BNPL) — to reach millions of customers on Amazon’s marketplace and mobile app.
“We know customers want convenient and flexible payment options — whether they’re checking out on Amazon.com or using Amazon Pay,” stated Amazon Pay Director Omar Soudodi. “With Affirm on Amazon Pay, merchants can offer a pay-over-time option to their existing customers and have another way to reach new customers.”
Interestingly, though, AFRM stock represents the clear winner on the deal, at least for the midweek session. As of this writing, AMZN is down more than 3% on Wednesday.
Rising E-Commerce Trend Might Help AFRM Stock
For its part, the BNPL specialist emphasized the rising popularity of digital wallets, which represents a key component of the contemporary shopping experience. “In addition, customers want more choice and flexibility when paying online. By integrating Affirm’s Adaptive Checkout, thousands of merchants can offer their customers personalized payment options and increased spending power through Amazon Pay’s convenient and secure checkout experience,” said Affirm President Libor Michalek.
Naturally, when the Covid-19 crisis initially struck, e-commerce sales peaked at 16.5% of total retail sales in the second quarter of 2020. Following a decline, the aforementioned metric has been on the rise, from a recent low of 14.5% in Q2 2022 to 15.1% in Q1 2023. With Amazon representing a significant chunk of e-commerce transactions, Affirm’s BNPL platform integration may help lift AFRM stock.
Even more compelling, Grand View Research points out that the global BNPL market size reached a valuation of $6.13 billion in 2022. Experts there project that the sector will expand at a compound annual growth rate (CAGR) of 26.1% between 2023 and 2030. At the forecast culmination, the BNPL ecosystem could deliver revenue of $38.57 billion.
Unsurprisingly, enthusiasm rings high for AFRM stock.
Challenges Still Lie Ahead
Despite the encouraging news today, AFRM stock still faces a challenging road ahead. In particular, Affirm faces obstacles in convincing prospective investors to give it a chance. While shares gained over 85% on a year-to-date basis, since the underlying market debut, they’re down almost 86%.
Also, data from TipRanks shows that analysts peg AFRM stock as a consensus moderate buy. However, their average price target presently sits at $15, implying over 10% downside risk.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
