On Thursday, Mizuho maintained its positive stance on Affirm Holdings Inc. (NASDAQ:AFRM), reaffirming an Outperform rating with a steady price target of $65.00. The endorsement comes amid expectations that lower interest rates could significantly boost the company's gross merchandise volume (GMV) by 30-35% above the consensus forecast for fiscal year 2027.
The firm suggests that Affirm's strategy to expand its credit offerings could lead to considerable growth. Coupled with the company's operational leverage, this expansion could potentially yield a GAAP earnings per share (EPS) scenario that is two to three times higher than current consensus estimates, which stand at approximately $1.00.
According to Mizuho's analysis, under this optimistic scenario, Affirm could be trading at a price-to-earnings (P/E) ratio of 17-18 times its fiscal year 2027 GAAP EPS. This valuation is notably lower than that of Visa (NYSE:V), which trades at approximately 20 times its earnings, despite Affirm's projected revenue growth being three to four times faster, at a rate of 35-40% compared to Visa's estimated 10%.
The financial firm's outlook for Affirm is based on the premise that the company's widening credit box in a lower rate environment will be a key driver of its growth. This growth is expected to be reflected in the company's top-line performance and profitability in the long term.
Mizuho's price target of $65.00 for Affirm remains unchanged, indicating a belief in the company's potential to achieve the outlined growth and valuation metrics. Affirm's stock continues to be watched closely by investors as the company navigates the evolving financial landscape.
In other recent news, Affirm Holdings Inc. has demonstrated robust financial performance, exceeding market expectations. The company's strong fourth-quarter results were backed by significant revenue growth, leading to upgrades and reiterations from major analyst firms. Barclays reiterated its Overweight rating following Affirm's integration with Apple (NASDAQ:AAPL) Pay, a development that potentially expands the company's reach among iPhone users.
Meanwhile, Goldman Sachs maintained a Buy rating and JPMorgan raised its stock target while retaining an Overweight rating, both encouraged by Affirm's notable revenue growth and commitment to achieve GAAP profitability by the fourth quarter of 2025. Needham, however, maintained a Hold rating, expressing caution due to the stock's anticipated premium valuation relative to its peers.
These recent developments also include a strategic partnership with Apple Pay, offering flexible payment options to U.S. customers. Affirm's strategy for fiscal 2025 includes maintaining a 30% growth in Gross Merchandise Volume while moderating operating expenses growth. Furthermore, key leadership changes have been announced, with CFO Michael Linford expanding his role to Chief Operating Officer and Rob O'Hare stepping in as the new CFO.
InvestingPro Insights
As Mizuho stands firm on its positive outlook for Affirm Holdings Inc. (NASDAQ:AFRM), the InvestingPro platform also provides insights that could be of interest to investors monitoring the company's performance. According to real-time data, Affirm has a market capitalization of approximately $13.78 billion and a high Price / Book ratio of 5.04. This suggests that the stock is being valued significantly above its book value, which can be indicative of investor confidence in the company's future growth prospects or potentially reflect a premium for the company's intangible assets or market position.
Despite not being profitable over the last twelve months, Affirm has shown strong revenue growth of 46.29% during the same period, which aligns with Mizuho's expectations for rapid top-line growth. This revenue growth is further bolstered by a substantial quarterly increase of 47.86%, showcasing the company's ability to expand its financial reach. However, with a negative P/E ratio of -26.3, it is clear that the market is pricing in future growth and the potential for profitability down the line.
InvestingPro Tips highlight that Affirm has experienced high price volatility, with significant returns over the last month (45.95%) and three months (45.04%), indicating strong recent performance in the stock market. However, analysts have noted that the company is not expected to be profitable this year, which could be a point of consideration for those looking at the long-term value proposition of Affirm's stock. For investors seeking a more in-depth analysis, there are additional tips available on the InvestingPro platform, providing a broader perspective on Affirm's financial health and market performance.
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