On Tuesday, Deutsche Bank reiterated its Hold rating and a $35.00 price target on Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM), ahead of the company's expected first-quarter 2025 earnings report. The bank forecasts Affirm to announce a revenue of approximately $670 million, which would mark a year-over-year increase of about 35%, and an adjusted earnings per share (EPS) of $0.37.
The analyst noted that the Buy Now, Pay Later (BNPL) sector continues to demonstrate resilience, and Affirm is capitalizing on this trend as it moves closer to achieving GAAP profitability. The introduction of the Affirm Card, an enhanced debit product, is seen as an extension of the company's value proposition into the offline space. Additionally, Affirm's collaborations with large marketplaces are gaining momentum.
With a recent downtrend in interest rates, Affirm is presented with an opportunity to approve a greater number of users. The lower cost of funding allows the company to adopt a more aggressive stance while still preserving profit margins. Despite this, the analyst highlighted that Affirm is expected to adhere to its strict underwriting standards due to the ongoing economic uncertainties.
The bank anticipates that Affirm will raise its forecast for the fiscal year 2025 gross merchandise volume (GMV) growth by two percentage points to over 28%, revenue growth to exceed 29%, and an adjusted operating margin of more than 19%. The Hold rating suggests that Deutsche Bank advises investors to maintain their current positions in Affirm shares without making additional purchases or sales.
In other recent news, U.S. consumers are projected to spend a record-breaking $18.5 billion through buy now, pay later (BNPL) services in Q4 2024, marking an 11.4% year-on-year growth, according to Adobe (NASDAQ:ADBE) Analytics.
Companies like Affirm, Klarna, and Afterpay are expected to benefit from this surge. Affirm, in particular, has seen positive analyst attention from Morgan Stanley, which upgraded the company's rating from Underweight to Equalweight and raised its price target to $37 from $20, citing strategic moves that position the company to attract a higher-income customer base.
On the other hand, Usiminas (OTC:USNZY), a steel company, saw its stock upgraded by Morgan Stanley from Equalweight to Overweight. The upgrade is based on the belief that the market has undervalued the potential benefits of the company's blast furnace refurbishment. These improvements are expected to begin reflecting in Usiminas' financial outcomes as early as Q4 2024.
In other company news, Mizuho Securities maintained its Outperform rating on Affirm's stock, projecting a potential 30-35% increase in gross merchandise volume for fiscal year 2027 due to lower interest rates. Affirm's recent strategic partnership with Apple (NASDAQ:AAPL) Pay, which enables flexible payment options for U.S. customers, was also noted. These developments are part of Affirm's strategy for fiscal 2025, which includes maintaining a 30% growth in Gross Merchandise Volume while moderating operating expenses growth.
InvestingPro Insights
To complement Deutsche Bank's analysis, InvestingPro data reveals that Affirm Holdings Inc. (NASDAQ: AFRM) has demonstrated strong financial performance, with a revenue of $2.32 billion in the last twelve months as of Q4 2024, representing a robust growth rate of 46.29%. This aligns with Deutsche Bank's expectation of continued revenue growth for the company.
InvestingPro Tips highlight that Affirm's stock has shown a high return over the last year, with a remarkable 148.79% price total return. This significant increase suggests that investors have been optimistic about the company's prospects, possibly due to the resilience of the BNPL sector and Affirm's strategic initiatives like the Affirm Card.
However, it's important to note that according to another InvestingPro Tip, analysts do not anticipate the company will be profitable this year. This insight corroborates Deutsche Bank's focus on Affirm's progress towards GAAP profitability, which remains a key area for investors to monitor.
For readers interested in a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Affirm's financial health and market position.
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