Here is a good example of how monumental the drop for some stocks has been in 2022. Last week, after delivering a better-than-expected quarterly report, shares of Affirm (AFRM) soared by 55% over two sessions. That brought the stock’s year-to-date performance to a more respectable decline of just… 76%.
The Buy now, pay-later (BNPL) company beat expectations on both the top-and bottom-line and also raised its outlook for the fiscal year (ending June).
Affirm also announced that its relationship with Shopify has been expanded with a new multiyear agreement, and in addition to its Split Pay service, the company will soon introduce to Shopify merchants its monthly interest-bearing product.
Morgan Stanley’s James Faucette says the results and commentary made by management “reassured the market on the near-term view for funding costs, credit performance, and loan demand.”
“Our core thesis for Affirm’s business remains largely intact,” the 5-star analyst went on to say, “as we see the company being well positioned to continue gaining share in lending to young consumers in the millennial and Gen Z demographics, especially vs. other fintechs such as Block that haven’t yet built out a robust set of credit offerings.”
To make the most of this “demographic opportunity,” the key will be to attain “acceptance scale.” The fact Affirm’s product suite “appears to be resonating” with big new platform/merchant partners like Stripe and Fiserv is encouraging.
Whether Affirm manages to build on the recent share gains remains to be seen; Faucette thinks some might be content to remain on the sidelines “until it’s clear how macro risks play out and how AFRM can consistently manage through them.”
That evidently is not a concern to Faucette, who rates AFRM an Overweight (i.e. Buy) along with an $80 price target. If it gets there, the stock could return ~237% gain from here over the course of the next year. (To watch Faucette’s track record, click here)
If we turn to the Street in general, we can see a bit of a conundrum; on the one hand, with 5 Buys and Holds, each, plus 2 Sells, the analyst consensus rates the stock a Hold. However, the bulls are a positive lot here and as such, the $44.50 average target makes room for one-year gains of ~86%. (See Affirm stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
