On Wednesday, CFRA analyst Caydee Blankenship reaffirmed a Sell rating on shares of Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM) with a steady price target of $24.00. The valuation is based on an enterprise value to sales multiple of 4.5 times the firm's fiscal year 2025 (ending in June) sales projection. This target is a reduction from Affirm's three-year historical average of 10.3 times, due to anticipated slower growth and a more stringent regulatory environment.
The analyst upheld the loss per share estimates for fiscal years 2024 and 2025 at -$1.93 and for fiscal year 2026 at -$1.26. Revenue forecasts for these years are set at $2.3 billion with a 43% increase, $2.7 billion with a 20% increase, and $3.2 billion with a 19% increase, respectively. Affirm's growth is expected to be influenced by Apple (NASDAQ:AAPL)'s recent announcement that iOS18 updates will enable U.S. users to choose Affirm's Buy Now, Pay Later (BNPL) options through Apple Pay. However, significant revenue contributions from this integration are anticipated after fiscal year 2025.
While the partnership with Apple could boost consumer awareness and adoption of Affirm's BNPL products, presenting a potential positive risk to the Sell rating, the analyst believes that Affirm still faces considerable challenges. These include achieving market penetration and scale comparable to its major BNPL competitors, such as Klarna, PayPal (NASDAQ:PYPL)'s Pay in 4, and Block's Afterpay.
The reiteration of the Sell rating follows the Consumer Financial Protection Bureau's (CFPB) recent interpretive rule that classifies BNPL lenders as credit card issuers, subjecting them to additional regulatory standards. This development is expected to impact Affirm's operations within the regulatory landscape.
InvestingPro Insights
As Affirm Holdings Inc. (NASDAQ: AFRM) navigates the evolving regulatory and competitive landscape, real-time data and insights from InvestingPro provide a deeper understanding of the company's financial health and market position. The current Market Cap of Affirm stands at $10.45B, reflecting the market's valuation of the company. Despite the challenges outlined by CFRA analyst Caydee Blankenship, Affirm has demonstrated a strong Revenue Growth of 40.05% over the last twelve months as of Q3 2024. Additionally, the company's Gross Profit Margin remains robust at 61.84%, indicating a solid ability to control costs relative to revenue.
InvestingPro Tips highlight that three analysts have revised their earnings upwards for the upcoming period, suggesting a potential positive sentiment shift among experts. Moreover, Affirm's stock has shown a significant return over the last week with a 9.03% price total return, which could indicate investor optimism in the short term. However, it's important to note that the company is not expected to be profitable this year, and the stock generally trades with high price volatility, which could mean greater risk for investors.
For those considering an investment in Affirm or seeking more comprehensive analysis, there are additional InvestingPro Tips available that can offer further guidance. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable insights.
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