Buy now, pay later was a sensation in 2021 as a potential alternative to credit cards. Investors flocked to companies like Affirm (AFRM), and share prices soared as high as $168 — massive investment returns in a matter of months.

Today, Affirm is a tale of a stock bubble that burst. Share prices have declined 93% from their peak, and many shareholders are left wondering what the future holds for the company.

Fortunately, Affirm’s tale hasn’t concluded. Instead, it’s just beginning. Here is why the future still seems bright, though it may require patience to reap the rewards.

Buy now, pay later is still alive and well

It’s important to differentiate between credit cards and buy now, pay later (BNPL). A credit card is essentially a line of credit, tallying up every purchase as a lump sum. BNPL works at the transaction level, treating each purchase like an individual loan. The critical difference is that unlike a credit card, where every purchase accumulates interest once you begin carrying a balance, BNPL can offer different terms for each purchase, sometimes interest-free.

Affirm is a publicly traded financial technology company headquartered in San Francisco, United States. Founded in 2012, the company operates as a financial lender of installment loans for consumers to use at the point of sale to finance a purchase.

Is profitability within sight?

One criticism of BNPL is the idea that consumers won’t pay their bills when times get tough. Affirm saw some of that, as delinquencies are up as we get further away from the pandemic-related stimulus programs. While delinquency rates are above 2020 and 2021 levels, they are tracking on par with 2019 trends. In other words, consumers are acting as they did before COVID-19, so I don’t think there’s a ton to worry about unless this changes.

Management says it has a goal to generate positive non-GAAP operating income by the end of fiscal 2023 (June 30). This isn’t true profitability, but it’s a step in the right direction and could show the market that the business is sustainable over the long term. Operating losses through the first two quarters of Affirm’s 2023 fiscal year were $647 million, but look for that to shrink over the next two quarters. There is roughly $2.3 billion in unrestricted cash and marketable securities on the balance sheet, plenty to fund operations for a while yet.