When Affirm holdings (NASDAQ:AFRM) went public at $ 49 a share in January, the stock taking off like a rocket. Actions in the e-commerce payment company almost doubled on their first day of trading. But, after several weeks of triple-digit pricing and peaking at $ 146.90 per share, this recent Initial Public Offering (IPO) has pulled back sharply.

Down more than 50%, its massive pullback was bad news for many who bought near its highs. Still, for those who just take a look, its recent weakness may present an opportunity. Why? At higher price points, the stock has taken a bit of a lead on itself.

But now, while the valuation remains rich, we have a much more attractive entry point. While it has benefited greatly from the tailwinds associated with the pandemic, the trends that support this business do not go away once Covid-19 does. With plenty of room to grow and a solid business model, the potential is huge here.

Of course, a recovery may not be immediate. With the “reopening of trade” taking much of the wind in tech games, a rally to $ 100 a share and above may take some time. Still, for investors looking for exposure to e-commerce and the “future of payments,” post-withdrawal this is a great long-term game.

AFRM Stock and its “Buy Now, Pay Later” Business Model

So what exactly is Affirm doing? The company offers “buy now, pay later” financing for online purchases. By helping to facilitate the sale of consumer goods (think exercise equipment, home furnishings), it makes money on both sides. That is, traders receive transaction fees. And, from buyers, it charges interest on the financing.

Installment loans are nothing new. This method of financing retail transactions is simply moving into the realm of e-commerce. And, given its positive impact on AOV (average order volume), it’s no surprise that online retailers large and small have used this service in their e-commerce operations.

This business was thriving before the events of 2020. But much of its success over the past year can of course be attributed to the global acceleration of e-commerce thanks to the pandemic. After seeing his sales increase 93% in 2020, growth will slow down this year.

Yet the expected growth of about 53.6% in 2021, and around 33.46% in 2022, is almost nothing to sneeze. Even with a somewhat rich valuation at today’s prices, its continued success in the years to come may be more than enough to send it back to its peak, and beyond.

Things are just starting to heat up

After last year’s unexpected boon to e-commerce, growth in 2021 and 2022 will look subdued in comparison. Last year’s acceleration in e-commerce may slow. But it doesn’t stop abruptly.

Some more skeptical of the stock may see its current valuation and state that its full potential is already being considered. Yes, with a market cap of $ 17.8 billion, compared to $ 669 million in year-over-year revenue, investors are clearly weighing that up on its future.

But, while there is a big growth premium factored in, AFRM stock still has a long-term lead. Of course, the short term can lead to continued sideways pricing. As I said above, the names of the tech that flourished during last year’s lockdowns are trumping stocks that are expected to gain big during this year’s scheduled ‘reopening’.

Still, with stocks remaining weak, it may be a good time to take a long-term position. The level of growth in 2021 will not exceed that of 2020. However, things are still heating up for Affirm. The e-commerce megatrend is not running out of gas anytime soon. And, as this fast growing industry continues to expand, so will this company.

Bottom line: jump on the recent pullback in AFRM stock

For now, this is mainly an indirect play on the rise of e-commerce. Still, it has the potential to become a diverse fintech operation. Simply put, to think of it simply as a “buy now, pay later” provider is short. With a seasoned fintech leader (Max Levchin) at the helm, Affirm may one day join the ranks of other large tech-focused financial firms.

Seen from this recent promotion, the company is starting to move away from financing the purchase of goods and is also moving towards financing services. With its current business booming and its potential to expand into other areas of the FinTech economy, this promises to be a fantastic long-term opportunity.

Better yet, after its recent correction, stocks have fallen to a much more optimal entry point. So what’s the game here? Take a step back and jump into the AFRM action.

As of the date of publication, neither Matt McCall nor the InvestorPlace research staff member primarily responsible for this article held (directly or indirectly) positions in any of the securities mentioned in this article.

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