The pressure is slowly mounting for all late bloomers. There are only a few days left to get the presents. The pre-Christmas shopping frenzy is not only affecting consumers as well as online and retail businesses. Payment service providers are also busier than at any other time of year. In addition to traditional credit and debit card providers, such as Visa or Mastercard, digital providers are trying to get as many transactions as possible. While PayPal and Apple are among the globally known top dogs here, Affirm is probably only familiar to very few consumers in our part of the world. The US company, which was founded in 2012, also offers its services in Australia, Poland and Spain. However, this expansion has had no impact on sales. In 2022, Affirm generated almost all of its revenue in its home market.
A good three quarters of the payments processed by the Californians originate at the point of sale (PoS). This means that the service is used directly when making a purchase. The remaining payments are made via the app, the shopping portal or the company's virtual payment card. Affirm generates revenue in different ways. The company receives a transaction fee from the connected merchants, which depends on the purchase price. Consumers have to pay interest on loans that are granted either by Affirm itself or by third-party banks. In addition, the company resells its financing. Various credit services are offered to investors involved here.
This business model has not yet yielded any profits. On the contrary: for the 2023 financial year, Affirm Holdings posted a bottom-line loss of almost one billion US dollars, an increase of more than a third. Nevertheless, the company is about to break even in terms of adjusted operating profit. Having already posted a positive figure in the first three months, CEO Max Levchin is also forecasting black figures for the full 2024 period. Specifically, the adjusted operating margin is expected to exceed 5%. Christmas business plays a key role here. Just in time for the festive season, Affirm announced a partnership with Blackhawk Network, one of the largest providers of gift cards in the US retail sector. True to the motto "Buy now, pay later" (BNPL), consumers can shop with these vouchers - and pay later in installments.
The latest collaboration will enable Affirm to bring its BNPL service to bricks-and-mortar retailers. In this way, the CEO wants to escape the "e-commerce cage" to some extent. Affirm Holdings has also recently been attracting bargain hunters on the stock market. After reaching an all-time high in November 2021, the Nasdaq-listed stock, which has been listed for almost three years, plummeted abruptly. Starting from a bottom in the USD 10 range, Affirm recently turned sharply upwards. The share is now approaching the IPO price of USD 49. The sharp ups and downs are accompanied by exceptionally high volatility. To date, there has been a historic price fluctuation range of around 80% for 2023. By comparison, the figure for the Nasdaq-100 Index is 15%.
The shaky share price has a direct impact on the conditions of yield optimization products. Investors can act as sellers of volatility. Leonteq has issued new soft callable reverse convertibles on Affirm Holdings. The CHF-denominated variant has a guaranteed coupon of 13.00% p.a. The USD-denominated counterpart pays a quarterly distribution of 15.00% p.a. The strike is as low as 50% of the initial level. This means that as long as Affirm Holdings does not fall by more than 50% by the end of the term in one year, investors will receive the denomination back in full. At Christmas 2024, they can then look forward to the maximum return corresponding to the respective coupon. If, on the other hand, Affirm trades below the strike at the final fixing, Leonteq would deliver the share at the strike price. Please also note the soft callable function. It makes early termination and redemption of these issues possible.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.