Affirm Holdings, Inc. (NASDAQ:AFRM) is the largest of the “buy now, pay later” lenders. The company lets shoppers split purchases into installments at online checkouts. At about $25.1 billion, its index case turns on a milestone it only recently reached. With profitability under standard accounting rules, which finally gives it a trailing price-to-earnings ratio, AFRM earned a spot in our tracking of 9 New Contenders for the S&P 500 Index. That headline trailing multiple sits low, near 12 times, which looks cheap against every other name here. But the figure is flattered by large one-time gains in recent results, and on next year’s expected earnings the forward price-to-earnings ratio is far higher, around 36 times. Revenue is running above $4 billion and growing, so the stock is not as cheap as the trailing number suggests. At the same time, it is still far from the triple-digit multiples elsewhere on this list.
Bull Case
A maturing business makes up the bull case. Improving credit performance and tighter costs have lifted reported profit, and its lineup of merchant and card partnerships keeps expanding. Additionally, Wolfe Research recently upgraded the stock to Outperform on better fiscal metrics. Affirm’s underwriting data and its deep integration at major online checkouts give it an edge that newer rivals struggle to match. And as installment lending moves further into the mainstream, the company is positioned to ride that shift. If the profit it just reached holds, the forward multiple is far from demanding for the growth on offer.
In the past six months, the stock yielded about 11% while the Insider Monkey Billionaire Index gained 11.6% over that same period.
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Bear Case
The bear case is the nature of the business. Affirm lends to consumers, so its fortunes rise and fall with the health of the shopper and the direction of interest rates, which shape both demand and funding costs. Its record of reported profit is still in its early stages, which matters because the index applies a four-consecutive-quarter profitability test. A consumer slowdown could interrupt that streak before it is long enough to qualify. The shares have also lagged the hotter names here, and the gap between the trailing multiple and the forward multiple could upset the investors drawn in by the cheap headline figure.
Bottom line
The bottom line is that the new profit turns Affirm into a genuine contender, since it now meets the profitability test rather than failing it. Eligibility hinges on proving that turn is durable rather than a one-time thing. The index clock will not start in earnest until the string of profitable quarters is long and clean enough to satisfy the committee’s trailing-year test. In the meantime, a single credit-driven stumble could push a decision well into the future.
Jim Cramer says to look past the credit noise on this stock.
Market Sentiment
On positioning, Affirm Holdings, Inc. is one of the few names here that cooled during the first half of 2026, with Insider Monkey’s database showing 57 hedge funds at the end of the second quarter of 2026, down from 61 the quarter before.
To view the complete ranking from 9 New Contenders for the S&P 500 Index, click HERE.
While we acknowledge the risk and potential of AFRM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AFRM and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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This article is originally published at Insider Monkey.
