Affirm’s Downgrade Drags FinTech IPO Index Down by 1%

The employment figures are rising, and The Federal Reserve appears secure to increase interest rates. As a result, FinTech IPO Index stocks, particularly those affected by interest rates, experienced a slight decline.

At the time, a week of trading shortened by the holiday index struggled and ended Friday with a slightly over 1% decline. Mainly there was a scarcity of news related to individual companies. It is worth mentioning that in June leading up to the end of the quarter, numerous stocks experienced a significant recovery, with their values increasing by double-digit percentages. The recent pullback observed over the past five sessions may be considered a  break in the upward encouragement.

Even so, it is worth noting that the index has gained approximately 26.3% since the beginning of the year, making 2023 a full year in terms of performance, at least up to this point. Nearly six months remain. The only predictable aspect is the presence of volatility.

As stated in the news release, the upcoming week indicates the commencement of earnings season, particularly with bank reports scheduled to be released next Friday. The information from significant institutions like JPMorgan will provide insights into card delinquencies, loan delinquencies, and the current state of consumer spending, indicating whether it is growing and expected to continue in the same manner.

Affirm’s rating was downgraded.

Over the past five sessions, the stock of Affirm guaranteed a decline of over 10% following Piper Sandler’s decision to downgrade the company to underweight and set a price target of $11. This rating cut was influenced by concerns about a portion of Affirm’s revenue generated from loan sales. Higher interest rates could impact profit margins with an increasing number of loans on their books. Additionally, the competitive landscape has been enhanced, as highlighted by PYMNTS, with the appearance of new players like Apple entering the buy now pay later space.

The latest Earnings results of Affirm agreed with the indication of a decline in consumer discretionary spending.

The climate impact of higher interest rates on other companies’ short- and possibly long-term performance cannot be ignored. Opendoor experienced a 3.3% decrease in its stock value. At the same time, there may not have been specific news about the company recently. Mortgage rates have surpassed 7%, reaching levels not witnessed since the end of the previous year. With mortgage rates remaining high, sellers need help in the market.

And individuals already have lower interest rates for their current properties. Selling and moving elsewhere would often require paying considerably higher rates, often significantly higher, for new digs. As a result, housing inventory is currently up to 25% lower compared to levels observed a year ago, according to realtors. This situation indicates a challenging period ahead for residential real estate platforms.

SoFi shares experienced a decline of 8.9%,  some of the gains they had made following the Supreme Court’s ruling invalidating the Biden administration’s proposal to forgive a sizable chunk of the owed amount for student loans. According to MarketWatch, Oppenheimer observed have expressed the view that the stock has already incorporated the majority of positive developments associated with the court decision.