J.P. Morgan analyst Reginald Smith has maintained their neutral stance on AFRM stock, giving a Hold rating yesterday.
Geoff Meacham has given his Hold rating due to a combination of factors that suggest a balanced view of Affirm Holdings’s current position and future prospects. On one hand, the company’s diversified funding strategy and differentiated operating model provide a sustainable competitive advantage, reflecting positively on its potential. Furthermore, management’s ability to surpass internal GMV expectations in the previous quarters and the consistent outperformance against quarterly GMV guidance paint an optimistic picture. However, the projected growth rates show a deceleration, with a notably conservative minimum growth expectation in the latter part of the fiscal year, which tempers the enthusiasm somewhat.
Additionally, despite an uptick in net charge-offs (NCOs), Affirm has historically over-reserved, suggesting a prudent approach to managing credit risk. The stability in delinquency rates further supports the notion that the company’s credit practices are sound. On the efficiency front, Affirm’s earnings power was showcased by a significant reduction in adjusted operating expenses and an impressive improvement in operating margins and profits. The efficacy of Affirm’s platform is underscored by its revenue generation per employee, which stands out even when compared to established players like American Express. This level of operational leverage and efficiency is commendable, but it seems that the current valuation already reflects these positives, leading to a Hold recommendation.
In another report released yesterday, BMO Capital also maintained a Hold rating on the stock with a $47.00 price target.
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Affirm Holdings (AFRM) Company Description:
Affirm Holdings Inc offers a platform for digital and mobile-first commerce. It comprises a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app. The firm generates its revenue from merchant networks, and through virtual card networks among others. Geographically, it generates a major share of its revenue from the United States.
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