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Affirm Holdings Inc. continues to draw mixed reactions as its stock explodes higher Friday in the wake of earnings.
The buy-now-pay-later company’s report an evening earlier showed an “acceleration in transactions per active customer, suggesting engagement is ever stronger,” according to Mizuho analyst Dan Dolev. He called out that Affirm
AFRM,
topped its guidance on revenue less transaction costs, a key company metric, and saw a decline in delinquencies.
Dolev also called Affirm’s outlook “conservative yet upbeat, baking in student loan payments headwinds” as he reiterated a buy rating and $20 price target on the stock.
Shares of Affirm roared as much as 31.0% higher in Friday morning action. It was more recently up 25.8%, which would make for its largest single-day percentage gain since May 13, 2022, when it advanced 31.4%.
Barclays analyst Ramsey El-Assal was also upbeat, noting that the company’s projection for full-year revenue less transaction costs to be in line with last year’s performance came as an “upside surprise.”
Further, he was encouraged by Affirm’s commentary on its debit-card product, which is adding 75,000 active cardholders each month and contributed $130 million in gross merchandise volume during the latest quarter.
“Affirm Card growth appears to have reached a positive inflection point,” El-Assal wrote, as he reiterated an overweight rating and $19 target price on the stock.
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Others remained more cautious, including Piper Sandler’s Kevin Barker, who acknowledged the “good quarter” but also flagged headwinds from funding costs.
“[H]igher funding costs and a limited appetite from the secondary market for consumer loans has caused AFRM to lean into longer-duration loans and hold more loans on balance sheet,” he wrote. “This is not necessarily a problem given AFRM has plenty of capital to fund these originations, but it does expose AFRM to greater interest rate and credit risk, similar to other traditional consumer lenders.”
That dynamic “will ultimately lead to a lower multiple on earnings,” he wrote, as he stuck with his underweight rating and $11 price target.
Wedbush analyst David Chiaverini added that “even though AFRM is guiding to be profitable on an adjusted operating basis for the foreseeable future,” the company’s pathway to delivering GAAP profits is “more questionable.”
Additionally, he worries about competition in the market for buy-now-pay-later services.
Of the 20 analysts tracked by FactSet who follow Affirm’s stock, five had buy ratings, 10 had hold ratings, and five had sell ratings, with an average price target of $15.26. Affirm shares were trading just north of $17 Friday.
The stock is up 76% so far this year but off 45% on a 12-month basis.
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