CNBC has reported recently the surge of AFFIRM shares after better-than-expected results as per the screenshot above.
AFFIRM (a buy now pay later business) has published some exciting highlights.
Let us look at their GAAP and non-GAAP reconciliation in detail:
- AFFIRM makes a profit in the most recent quarter by using non-GAAP measurements. Using the whole year results ending 30 June 2023, total revenue is $1.587B and total operating costs are $2.788B, representing an operating loss of $1.2B.
- Yet through the lens of non-GAAP, the last quarter was profitable with $14.7M because non-GAAP does not include the costs of depreciation & amortization, stock-based compensation, enterprise warrant, restructuring and other costs. Going forward, I recommend all to focus more on the GAAP figures as that gives a better view of the financials. Creative accounting and business narratives can distract us from having a realistic view of the business.
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The need to probe further into the financials is necessary so that we can better appreciate the financial fundamentals of the business. After 1 year, AFFIRM suffered a loss of $1.2B, compared to the loss of $0.866B from the same period a year ago.
Conclusion
Let us perform the due diligence necessary so that we can filter out great companies. It is possible that some of the media focus on certain good parts and omit other “necessary” portions.
No one should care more about our money than ourselves. The due diligence will be the leverage we have. Should the price plunge, this will give us the confidence to hold or buy even more.
Without good fundamentals, I recommend staying away.
AFRM