Introduction
Affirm Holdings Inc. has been met with a mix of reactions as its stock experiences a significant surge in the wake of its latest earnings report.
Strong Earnings Performance
According to Mizuho analyst Dan Dolev, Affirm’s report reveals a notable increase in transactions per active customer, indicating improved engagement levels. Dolev also highlights that the company exceeded its revenue guidance while successfully reducing delinquencies.
Positive Outlook and Growth Opportunities
Dolev remains optimistic about Affirm’s future, describing their outlook as both “conservative yet upbeat,” considering potential headwinds from student loan payments. He maintains a buy rating for the stock and sets a $20 price target.
Similarly, Barclays analyst Ramsey El-Assal is upbeat about Affirm’s performance. He views their projection for full-year revenue as an unexpected positive surprise, matching last year’s results. El-Assal is particularly encouraged by the growth of Affirm’s debit-card product, which adds 75,000 active cardholders each month and contributed $130 million in gross merchandise volume in the latest quarter.
Significant Stock Performance
Driven by the positive news, shares of Affirm experienced an initial surge of as much as 31.0% in Friday morning trading. As of now, the stock is up 25.8%, marking its largest single-day percentage gain since May 13, 2022, when it advanced 31.4%.
Conclusion
Affirm Holdings Inc. continues to impress investors with its strong earnings performance and positive outlook. The company’s focus on customer engagement, along with the growth of its debit-card product, contributes to its ongoing success in the market.
Affirm Faces Challenges Amidst Strong Quarter
Despite a strong quarter, financial analysts remain cautious about Affirm’s future outlook. Kevin Barker, from Piper Sandler, recognizes the positive performance but brings attention to potential headwinds caused by increased funding costs. As a result, Affirm has turned to longer-duration loans and holding more loans on its balance sheet. While this strategy is not necessarily problematic given Affirm’s ample capital for funding, it does expose the company to greater interest rate and credit risks, similar to traditional consumer lenders.
Barker suggests that this dynamic may lead to a lower multiple on earnings, maintaining his underweight rating with a $11 price target for Affirm. Similarly, Wedbush analyst David Chiaverini expresses concern about Affirm’s ability to deliver GAAP profits, despite forecasting profitability on an adjusted operating basis in the foreseeable future. Chiaverini also worries about the competitive landscape for buy-now-pay-later services.
According to FactSet, out of the 20 analysts following Affirm’s stock, five hold buy ratings, ten hold hold ratings, and five hold sell ratings. The average price target is $15.26, while Affirm’s shares were trading slightly above $17 on Friday.
While Affirm’s stock has experienced a 76% increase this year, it has declined by 45% over the past 12 months.
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