Perhaps you’re looking for a fintech stock to invest in and hold in 2023. That’s good, but Affirm Holdings (NASDAQ: AFRM) is inappropriate because the company is still grappling with the consequences of pandemic-era over-hiring.

I am neutral on AFRM shares because the company’s latest results were underwhelming, and an inflation-driven decline in client spending is anticipated to pose Affirm more troubles.

Affirm Holdings, based in California, offers ‘buy now, pay later’ (BNPL) services via a mobile application.

This platform’s goal is to “present consumers exactly what they will pay up front, never raise that amount, and never impose any late or hidden costs.

It’s an intriguing credit card option, but Affirm Holdings is particularly exposed to swings in interest rates and inflation.

Furthermore, it looks like Affirm’s previous management missteps are now catching up with it, potentially causing further financial harm to the floundering fintech startup.

Over-Hiring at Affirm Leads to Job Cuts

Affirm Holdings recently announced job layoffs, joining what I refer to as the increasing ‘tech layoff club.’

You may have heard of technology companies cutting 5% or 10% of their workforce but, Affirm’s employment loss of 19% is particularly concerning.

For one thing, massive job layoffs might jeopardize Affirm’s capacity to support customers, develop new goods and services, and so on. Yet, the large-scale layoffs reflect the dubious decisions made by Affirm Holdings’ management.

The core cause of where we are today is that I moved too slowly as these macroeconomic factors developed,” Affirm Holding CEO Max Levchin admitted in a note to workers. After rapidly expanding in the aftermath of the COVID-19 outbreak and the resulting tech boom, Affirm “intentionally hired ahead of the income required to support the size of the team.

According to the Wall Street Journal, the corporation now plans to pay between $35 million and $39 million in restructuring charges.

To put it another way, Affirm overhired, and now the company, its stockholders, and 19% of its employees are suffering the price.

To be sure, Affirm Holding’s management couldn’t have predicted strong inflation and rising interest rates, which aren’t ideal for a company aiming to operate in the BNPL area. Yet, it appears that Affirm overestimated its capabilities and will have to accomplish more with less in 2023.

AFRM Net Loss Almost Doubles

It’s one thing to have a bad quarter; it’s quite another to nearly double a company’s net loss. Affirm Holdings’ fourth-quarter 2022 results “disappointed” Mizuho analyst Dan Dolev, and you’ll probably agree that the data is troubling.

Here’s what I think was the most disappointing: The net loss of Affirm Holdings nearly doubled from $159.46 million in the previous quarter to $324.01 million in Q4 2022.

Affirm’s loss per share increased from $0.57 to $1.10 throughout that time period.

Nevertheless, this performance fell short of Wall Street’s projection of a net loss of $0.99 per share.

In terms of revenue, AFRM’s $400 million in quarterly sales fell short of analysts’ consensus forecast of $416 million.

Levchin said that Affirm “began increasing pricing for our merchants and consumers later in the year than we should have, and this process has taken us longer than we intended.” This “harmed both our capacity to approve more consumers and boost our profit,” the CEO stated.

It’s wonderful to admit mistakes, but this raises an important question: how long will it take Affirm Holdings to fix its previous mistakes?

Prospective investors may also concern whether Affirm’s management will continue to make poor decisions during these difficult economic times.

Experts say AFRM Stock is a Good Buy

According to Wall Street, AFRM is a Hold with three Buys, ten Holds, and one Sell.

Affirm Holdings’ average price target is $14.96, showing an 11.1% upside potential.

Should You Buy AFRM Stock?

At best, I am neutral on AFRM shares because the BNPL market may revive, which might benefit Affirm Holdings and its stockholders.

A turnaround, on the other hand, would necessitate better decision-making from Affirm’s management and would most certainly take months, if not the entire year of 2023, to achieve.

As a result, now is probably not the time to consider investing in AFRM stock.

Use it as a lesson in the unintended consequences of poor executive-level decisions and how tough it may be to undo the damage.

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