FinTech IPO Index Slips 1% as Affirm Sinks on Analyst Downgrade

The job numbers came in hot.

The Fed looks set to raise rates.

And the interest rate-sensitive names in the FinTech IPO Index took a bit of a hit.

In a holiday-shortened trading week, the index limped into Friday down a bit more than 1%, There was a dearth of company-specific news, and it must be said that through June, and headed into the end of the quarter, several stocks rebounded by double-digit percentage points. Perhaps the pullback through the past five sessions has been a bit of a breather. 

Perhaps not. Nonetheless, the index is up about 26.3% year to date, so 2023 has been a strong year, at least so far. There are still nearly six months left, so the only certainty is volatility. 

Next week, of course, marks the start of earnings season, the official start, as bank reports start to come in next Friday. And with the likes of JPMorgan etc., we’ll get a sense of card delinquencies and loan delinquencies, and whether consumer spending is, and will remain buoyant.  

In the meantime ... 

Affirm Gets a Downgrade

Shares of Affirm sank more than 10% through the past five sessions, where Piper Sandler downgraded the name to underweight, and assigned a $11 price target. As noted by sites such as Yahoo Finance, the ratings cut came amid discussion of the fact that a slice of the company’s revenues come from selling loans. But as Affirm holds more loans on the books, higher rates may crimp margins. And as had been widely known, the competitive landscape is heating up. PYMNTS spotlighted the competitive pressures that may lie within the buy now, pay later space through new entrants, including Apple.  

Affirm’s own recent earnings results have given the nod to a consumer pullback when it comes to discretionary spending. 

Higher interest rates may dampen on other companies’ results in the near (and perhaps longer) term. Opendoor’s stock was down 3.3%. And though there were no headlines surrounding the name these past several days, it should be noted that mortgage rates were north of 7%, touching highs not seen since the end of last year. And as mortgage rates remain lofty, there’s a bit of seller’s conundrum. 

They’ve already had lower rates in place with their existing properties, and selling now and finding somewhere else to live means that they would have to pay more — in many cases a lot more — for new digs. Thus, housing inventory is as much as 25% lower than had been seen a year ago, per realtor.com which points to a rocky time ahead for residential real estate platforms. 

Shares of SoFi retreated 8.9%, giving up some gains seen in the wake of the Supreme Court ruling that struck down the Biden dministration’s plan to forgive hundreds of billions of dollars in student loans. As reported by MarketWatch, Oppenheimer analysts have stated that most of the good news surrounding the decision has already been reflected in the stock.

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