Affirm stock price has been under intense pressure in the past few months as investors worry about the buy now, pay later (BNPL) industry. AFRM shares have collapsed by more than 87% from their all-time high, bringing the company’s market cap to more than $6 billion.
BNPL challenges remain
The BNPL industry has seen a lot of growth in the past few months as buyers switch from credit cards. As a result, many companies in the sector have accumulated millions of customers and merchants. The peak of the industry happened when Block, formerly known as Square, decided to acquire AfterPay, an Australian BNPL company.
Recently, however, the industry has fallen out of favor among investors. For example, the Block stock price has collapsed by more than 75%, bringing its market cap to $41 billion. This is notable since the company acquired AfterPay for more than $30 billion.
The same has happened in Australia, where the Zip stock price has tumbled by over 96% from its all-time high. At the same time, private companies in the BNPL sector have struggled. This week, it was reported that Klarna was fundraising at a $15 billion valuation. In its peak, the company was valued at over $45 billion.
Affirm stock price has plummeted for several reasons. First, retail spending has crashed in the past few months as inflation surges. Therefore, analysts believe that the company’s growth will be affected.
Second, interest rates are surging, making it expensive for the company to raise money that it uses to fund its business. The Fed has already hiked rates by 150 basis points this year and hinted that more hikes were on the way.
Further, competition is rising in its key markets. For example, Block is accelerating its AfterPay investments in the US. Further, Apple recently moved into the industry. This could be a major move because of the popularity of Apple Pay.
Affirm stock price forecast
The daily chart shows that the AFRM stock price has been in a strong bearish trend in the past few months. The sell-off gained momentum when the stock moved below the key support at $47.44. Now, it remains below the 25-day and 50-day moving averages.
It has also formed a descending channel that is shown in black. The current price is slightly below the upper side of this channel. Therefore, the path of the least resistance for the Affirm share price is still bearish, with the next key support being at $13.25.