Bank of America Securities analyst Jason Kupferberg reiterated a Hold rating on Affirm Holdings (AFRM – Research Report) yesterday and set a price target of $41.00.
Jason Kupferberg has given his Hold rating due to a combination of factors including Affirm Holdings’ strong third-quarter results and fourth-quarter guidance, which exceeded Bank of America’s and Street’s expectations. However, the tepid response from the stock market can be attributed to high investor expectations and a disappointing performance from one of Affirm’s significant merchants, Shopify. Despite Affirm’s key metrics surpassing guidance, driven by a better-than-anticipated Gross Merchandise Volume (GMV) and slightly improved Revenue Less Transaction Costs (RLTC) margins, concerns were raised by higher than expected loss provisions and an increase in the reserve rate, which indicates a potential for higher future losses.
Kupferberg also highlighted Affirm’s effective credit management and stable credit performance, which has provided the confidence to modestly increase risk exposure. Nonetheless, with a valuation at 8.5 times the fiscal year 2025 RLTC, the risk/reward is seen as balanced. While Affirm is performing well operationally, the analyst remains cautious about potential macroeconomic impacts, especially since Affirm’s business has a bias towards discretionary spending by lower to middle-income consumers. These factors combined with a cautiously optimistic fourth-quarter guidance suggest that while Affirm is executing well, the current valuation adequately reflects the company’s prospects, warranting a Neutral or Hold stance.
In another report released yesterday, RBC Capital also maintained a Hold rating on the stock with a $43.00 price target.
AFRM’s price has also changed dramatically for the past six months – from $21.760 to $31.580, which is a 45.13% increase.
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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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