Shares of Affirm (AFRM) were up as much as 13% on Tuesday morning after news the company’s buy now, pay later features would be integrated into self-checkout lines at Walmart (WMT).
Shoppers can already use Affirm to spread out payments for goods purchased on walmart.com, at the company’s auto centers, its vision centers, and in regular checkout lines with a cashier.
In other words, this is an incremental product update on a solution already offered to the vast majority of Walmart shoppers. If Affirm’s partnership with the retailer is going driving any business outcomes — more sales, more customers, etc. — those outcomes are already being driven.
But that this update is pushing the stock higher shows just how challenging this market has become for many investors stuck with 2022-era positions still on. Data from FinViz shows that around 21% of Affirm’s float is being sold short, meaning short sellers have piled up bets the stock will fall. For context, most companies have 1% or less of their float sold short.
When short sellers end up wrong-footed as the market moves against them, they can often be squeezed out of these positions even if their fundamental views haven’t materially changed.
Affirm stock fell more than 90% from its late 2021 highs to its lows earlier this year. Traders saw the name as one likely to bear the brunt of impacts from higher rates and fears of a consumer slowdown. And the stock fell commensurately.
But times have changed both in the markets and the economy.
There are signs that for BNPL plays like Affirm conditions have improved. Utilization of these offerings was up 40% over last year on Cyber Monday, according to Adobe Analytics.
And the stock’s move in the last few months — Affirm shares have gained 180% since Nov. 1 and shares are up nearly 500% this year — shows clear signs of traders get pushed out of bearish positions.
And when product updates are pushing a company’s stock around by double-digit percentage points and shares are heavily shorted, it is likely these moves are less about a material upgrade in the market’s view of the terminal value of the business’s discounted future flows and more about positioning in a market rapidly changing direction.
Because while Affirm is neither a member of Magnificent Seven nor the remaining 493 stocks in the S&P 500, these shifts have knock-on effects across sectors, styles, and sizes.
