Affirm CEO talks recession, Apple Pay Later, and being an entrepreneur in volatile markets
Affirm founder and CEO Max Levchin acknowledged that although consumers haven’t pulled back on spending yet, there are signs of increasing stress as households battle high levels of inflation.
“There is a little bit of consumer stress that we can tell,” Levchin told Yahoo Finance Live at the Goldman Sachs Communacopia + Technology Conference on Tuesday (video above). “I think at this point, it’s sort of a fairly commonly repeated refrain: The lower credit-tier folks are starting to stumble a little bit.”
Levchin’s comments came on a day when the Dow Jones Industrial Average lost nearly 1,300 points after a hotter-than-expected Consumer Price Index (CPI) reading. The data sparked worries the Fed would move more aggressively in raising interest rates, in turn hampering the financial standing of consumers.
“My expectation is that if things continue to rise in interest rates, we will see eventually some number of layoffs, joblessness, and that will ultimately have an impact,” Levchin added. “And we have the tools necessary to navigate that. But it is, from my point of view, in the very early stages.”
Levchin’s buy now, pay later (BNPL) outfit went public in early January 2021. The stock, initially priced at $49, skyrocketed to $100 by the close of its first day of trading, in part due to optimism around BNPL companies and Levchin’s strong reputation as the co-founder of PayPal. By late November, Affirm’s stock hit $168 a share after the company landed deals with Amazon, Apple, and Shopify.
However, shares of Affirm have since fallen to $24 as investors put pressure on unprofitable tech companies and the stock market fixates on interest rates.
In June, Apple dealt another blow to the stock when the tech giant announced it plans to roll out its own BNPL service, called Apple Pay Later, as part of an iPhone update.
According to Levchin, it’s “too early to tell” how Apple’s integrated offering will affect Affirm’s business. Still, the CEO struck an optimistic tone.
“Apple choosing to enter by now pay later with no late fees is a profoundly important statement to the industry,” Levchin said. “We’re still massively underpenetrated in the US and even worldwide. … Apple coming in and saying ‘No late fees is the right way to do this’ endorses our approach for the last 11 years. Generally speaking, I’m quite positive.”
Even in the face of the volatility, Levchin told Yahoo Finance he still hasn’t sold a single share of Affirm. He isn’t willing to compromise the business just to get the stock price higher either, he added.
“It’s very hard for me to read into the minds of our investors,” Levchin said. “My job and my promise to them is to build a great company and to think in terms of years. If I had my druthers, I would think in decades and beyond because I think of myself as a long-term entrepreneur.”
Affirm recently reiterated its expectation to be profitable in fiscal year 2023 despite taking a more cautious stance in its near-term guidance.
“I cannot and will not attempt to find a way to move the stock price on a day-to-day basis,” Levchin added. “I would like to continue printing excellent quarters with my team. Over time, the stock price will undoubtedly catch up.”
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