On Monday, Goldman Sachs initiated coverage on shares of Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM) with a Buy rating and established a price target of $42.00. Affirm, known for its modern credit solutions geared toward consumers, has garnered attention for its varied product offerings that include point of sale financing and everyday spending options.
The company's sophisticated underwriting processes have been highlighted as a key strength, particularly when compared to other fintech companies. Affirm's success in maintaining well-managed credit outcomes, even while expanding at a pace faster than its peers, has been noted as a significant achievement.
Affirm's strategy of short duration receivables and transaction-level underwriting is credited for its ability to effectively manage credit risks. This method allows the company to individually assess and underwrite various types of consumer spending, thereby mitigating potential credit issues.
Goldman Sachs' positive outlook on Affirm is also based on the company's expansive distribution network, which is seen as a vital component in supporting its sustainable growth. The firm anticipates that Affirm will maintain a Gross Merchandise Volume (GMV) growth rate of over 15% over time, bolstered by its distinct underwriting capabilities and broad market reach.
In other recent news, Affirm Holdings Inc. has been featured in various analyst notes and regulatory updates. CFRA maintained a Sell rating on Affirm, with a price target of $24.00, citing anticipated slower growth and a more stringent regulatory landscape. Revenue forecasts for fiscal years 2024 to 2026 are set at $2.3 billion, $2.7 billion, and $3.2 billion respectively, influenced by the integration with Apple (NASDAQ:AAPL)'s iOS18 updates.
BTIG initiated coverage on Affirm with a Neutral rating, highlighting the company's sustainable growth. The firm expects Affirm's Gross Merchandise Volume (GMV) to grow at a rate of 25-35% year-over-year. However, market expectations and potential higher delinquencies or losses could pose challenges to Affirm's stock performance.
RBC Capital maintained its Sector Perform rating on Affirm with a steady price target of $43.00, while BMO Capital Markets adjusted its outlook, reducing the price target to $46 from the previous $48 but retaining a Market Perform rating. RBC Capital also lowered its downside valuation for Affirm to $25, reflecting the current market dynamics.
The U.S. Consumer Financial Protection Bureau (CFPB) announced an extension of certain consumer protection rules typically applied to credit cards to the Buy Now, Pay Later (BNPL) industry, impacting companies like Affirm. The new interpretive rule will require BNPL lenders to adhere to a set of obligations that credit card issuers currently follow under the Truth in Lending Act.
InvestingPro Insights
Goldman Sachs' endorsement of Affirm Holdings Inc. (NASDAQ: AFRM) aligns with recent observations from InvestingPro. Analysts have noted a trend of upward earnings revisions for the upcoming period, reflecting optimism in Affirm's financial prospects. Additionally, while the stock has experienced significant volatility and price declines over the past six months, it has also delivered a high return over the last year. This juxtaposition of recent challenges and overall strong performance could suggest potential for those willing to weather market fluctuations.
From a financial standpoint, Affirm's revenue growth has been impressive, with a 40.05% increase over the last twelve months as of Q3 2024. This growth is further underscored by a substantial quarterly revenue growth of 51.23% in Q3 2024. Despite these robust figures, the company's profitability remains a concern, as analysts do not anticipate Affirm will be profitable this year, and the company has not been profitable over the last twelve months. Additionally, the company's liquid assets surpass short-term obligations, which may provide some financial flexibility in the near term.
Investors considering Affirm may find value in the additional 8 InvestingPro Tips available, which provide deeper insights into the company's financial health and market potential. To explore these insights and more, a visit to https://www.investing.com/pro/AFRM is recommended. For those looking to access the full suite of features, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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