Affirm-Lowe's Partnership Expands Network but Doesn't Solve Valuation or Risk Overhang

What happened

Affirm announced a partnership with Lowe's to offer its BNPL payment plans online and in the home improvement retailer's mobile app, while Lowe's will be featured in Affirm's marketplace. This aligns with Affirm's strategy to scale its merchant network, building on existing integrations with key partners like Amazon and Shopify, as noted in recent filings showing strong GMV growth and profitability. However, the partnership is incremental and typical of press releases that portray growth optimistically, without addressing core financial vulnerabilities highlighted in the DeepValue report. Affirm trades at a 204% premium to its DCF-based intrinsic value of ~$24, with elevated leverage (Net Debt/EBITDA ~9x) and sector delinquencies near 30%, creating significant downside risk. Thus, while the Lowe's deal may modestly boost transaction volumes, it does not alter the fundamental overvaluation or mitigate credit and regulatory uncertainties that underpin the SELL stance.

Implication

The Lowe's partnership enhances Affirm's network effects by adding a major retailer, potentially driving incremental GMV growth and user engagement in the near term. However, in a BNPL sector plagued by high delinquencies and regulatory scrutiny, such growth may not translate to durable profitability if credit costs spike or funding markets tighten. Affirm's leveraged balance sheet and thin interest coverage (~0.3x) leave it exposed to economic shocks, overshadowing new merchant additions that don't materially improve unit economics. Valuation remains stretched at 104x P/E and 43x EV/EBITDA, with the stock pricing in perfect execution despite management's guidance for slowing growth rates. Therefore, investors should remain defensive, as this news confirms execution but fails to provide a margin of safety against the core risks of overvaluation, funding dependency, and regulatory headwinds.

Thesis delta

The DeepValue report already rates Affirm as a POTENTIAL SELL due to excessive valuation, high leverage, and sector risks. This partnership is a positive but tactical move that doesn't shift the financial or risk profile—it may support growth but doesn't address the premium pricing or vulnerability to credit/funding shocks. Thus, no material delta; the SELL stance remains unchanged, emphasizing that incremental partnerships aren't enough to outweigh fundamental concerns.