On Thursday, Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM), currently trading at $63.34 with a market capitalization of $19.9 billion, experienced a positive shift in market sentiment as Jefferies changed its rating on the company's stock.
The financial services firm upgraded Affirm from a Hold to a Buy status, simultaneously raising the price target to $82.00, up from the previous target of $70.00. According to InvestingPro data, the stock has demonstrated remarkable momentum with a 107% surge over the past six months.
The adjustment in rating and price target by Jefferies is based on several factors that indicate a strong performance and potential for growth for Affirm. The firm's decision is rooted in recent growth trends observed in the company, with InvestingPro data showing impressive revenue growth of 46.5% in the last twelve months.
While the company maintains a strong gross profit margin of 42.3%, InvestingPro analysis indicates the stock is currently trading above its Fair Value. The firm's decision considers anticipated improvements in gross merchandise value (GMV) estimates that surpass consensus expectations. Moreover, Jefferies anticipates margin expansion for Affirm, coupled with robust credit performance.
The analyst from Jefferies highlighted that Affirm's prospects are further bolstered by favorable interest rate tailwinds. These elements combined suggest that the company is positioned well relative to its valuation when compared to its peers.
The new price target of $82 is derived from a multiple of 1x calendar year 2026 enterprise value to adjusted operating income, which the analyst uses as a proxy for price-to-earnings growth (PEG). This valuation is notably below the average peer multiple of 1.4x.
In recent times, Affirm has reported several positive developments that have contributed to the upgraded outlook. The company has secured new capital and formed partnerships with additional merchants, a move that is expected to further solidify its position in the market and enhance its financial metrics.
The upgrade by Jefferies to a Buy rating reflects a confidence in Affirm's capacity to capitalize on these positive trends and maintain its growth trajectory. The raised price target to $82 from $70 underscores the firm's improved expectations for Affirm's financial performance and market valuation.
In other recent news, Affirm Holdings has expanded its partnership with Adyen (AS:ADYEN), a global financial technology platform, to broaden payment solutions for Adyen's merchants in Canada. This collaboration has seen an average annual volume increase by more than sevenfold from 2021 to 2023, with over $125 million processed in payments through AffiniPay. Affirm's revenue growth of 46.5% year-over-year is a testament to this partnership's success.
On the analyst front, Deutsche Bank (ETR:DBKGn) has increased its price target for Affirm from $45 to $75, maintaining a Hold rating. Mizuho (NYSE:MFG) Securities and BTIG also showed confidence in Affirm by revising their price targets to $78 and $81 respectively.
Affirm has also secured a significant capital partnership with investment firm Sixth Street, providing the company with up to $4 billion for its loans. This partnership is expected to enable Affirm to potentially issue over $20 billion in loans within the next three years.
These are just a few of the recent developments that highlight Affirm's strategic growth and strong market position.
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