Affirm's Wayfair Expansion to UK and Canada Highlights Growth but Fails to Address Overvaluation and Core Risks

What happened

Affirm announced the expansion of its partnership with Wayfair to the UK and Canada, enabling shoppers in these regions to use its BNPL services for purchases like furniture. This move aligns with Affirm's stated strategy of international growth and deepening merchant integrations, as noted in the DeepValue report's future vision. However, the report highlights that Affirm faces significant risks, including high leverage with Net Debt/EBITDA at 9.13x, sector delinquencies near 30%, and regulatory uncertainties in the BNPL space. Despite achieving GAAP profitability and positive free cash flow, the stock trades at a 204% premium to its DCF intrinsic value of $24.11, indicating severe overvaluation. Therefore, while this expansion could boost GMV, it does not mitigate the fundamental concerns that underpin the 'POTENTIAL SELL' recommendation.

Implication

This partnership extension could support Affirm's GMV and revenue growth by entering new markets, potentially enhancing its network effects. However, expanding into the UK and Canada introduces additional regulatory complexities and competition, which may strain resources and increase compliance costs. The DeepValue report emphasizes that Affirm's high valuation multiples (e.g., ~104x P/E) leave no room for error, and any credit or funding shocks could severely impact financials. Investors should monitor whether this move improves unit economics or merely adds volume without corresponding profitability, given the thin equity and reliance on secured funding. Overall, for value-focused investors, the news does not change the unfavorable risk/reward equation, and the stock remains overpriced relative to intrinsic value and underlying risks.

Thesis delta

The expansion with Wayfair supports Affirm's growth narrative but does not materially reduce the key risks of leverage, credit exposure, and regulatory uncertainty highlighted in the DeepValue report. Consequently, the core investment thesis of 'POTENTIAL SELL' remains unchanged, as the stock's valuation still lacks a sufficient margin of safety.