AFRM braces for more headwinds

Affirm (NASDAQ: AFRM) stock price sell-off intensified this week as concerns about competition continued. The shares dropped to a low of $9.47, the lowest point since January 10 of this year. They have plunged by over 95% from the highest point on record.

Apple competition continues

Technology companies have done relatively well in 2023 as evidenced by the performance of the Nasdaq 100 index. However, most of the tech leaders like Meta Platforms and Nvidia are companies that are highly profitable.

Fintech companies have lagged behind the performance of other tech companies. For example, companies like PayPal, Block, and Coinbase are still languishing near their lowest levels in January. 

Affirm stock price has erased gains made earlier this year and is now trading at the lowest point since January. This decline has brought its total market cap to over $2.7 billion, which is much lower than its all-time high of over $20 billion,

The most recent catalyst for the sell-off was a report that Apple had finally launched its Buy Now Pay Later (BNPL) service. In a statement, the company said that Apple Pay Later service has been launched to a select number of customers with a full rollout expected to happen later this year.

Apple is a major challenge for Affirm because of the success of Apple Pay, which has over 383 million users globally. Also, unlike Affirm, Apple has almost unlimited financial resources. Its balance sheet shows that it has over $51 billion in cash and short-term investments.

This financial situation is better than Affirm, which ended the quarter with $1.6 billion in cash. Its total loss for the year was $814 million. Therefore, with interest rates set to remain at an elevated level, the company will likely find it difficult to achieve profitability. Affirm downplayed Apple’s entry, writing:

“Affirm has offered this for a decade through personalized payment plans with term lengths ranging from six weeks to 60 months. By underwriting every single transaction, we not only empower consumers but help merchants drive growth. The prize remains massive, and Affirm is well-positioned to win.”

Affirm stock price forecast

AFRM  chart by TradingView

The daily chart shows that the AFRM stock price has been in a strong bearish trend in the past few months. It is now hovering near its all-time low. The stock remains below all moving averages while daily trading volume has dropped.

Further, the MACD has moved below the neutral level while the Relative Strength Index (RSI) has moved below the neutral point. The stock seems like it has formed a small head and shoulders pattern. Therefore, the shares will likely have a bearish breakout, with the next key support to watch will be at $7.