Shares of Affirm Holdings Inc. had risen about 125% in the three months leading up to its latest earnings report. This type of rally has helped set the bar “too high,” according to one analyst.
Therefore, while Affirm AFRM,
beat expectations with fiscal second-quarter results On Thursday, Wall Street was perhaps disappointed by outlooks for the second half of the fiscal year that implied slowing revenue growth, adjusted operating profit and gross merchandise volume, Kevin Barker wrote of Piper Sandler.
“This guidance will likely reset margin expectations and put some near-term pressure on the stock,” he said, while maintaining his Underweight rating on the stock but raising his price target to $19 from $14.
Affirmate shares fell more than 13% in Friday’s action.
Wells Fargo’s Andrew Bauch said the December quarter report contained fodder for both sides.
“We suspect bullish investors continue to be encouraged [Affirm’s] stellar execution in recent prints,” he wrote. “That said, while we believe bears could likely yield on this front, they could be pointing to elevated valuation levels that prove too difficult to own shares.”
In his view, debates over Affirm’s valuation are “fruitless,” as the company has no true publicly traded peer.
“While underperforming, shares are subject to market momentum,” wrote Bauch, who remained with an equal-weight rating but doubled his price target to $40.
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However, from the bear camp, Morgan Stanley’s James Faucette was trying to make the case that the stock looked overvalued. He stated that “the rate of improvement of the company does not justify the valuation”.
“We continue to believe the valuation is overblown and remain focused on it [Affirm’s] ability to close the monetization gap [Capital One] while accelerating margin expansion and maintaining revenue growth, a combination that could prove challenging,” he said.
Faucette has an Underweight rating and a $20 price target on the stock.
Mizuho’s Dan Dolev, meanwhile, said Friday’s sell-off could prove to be a buying opportunity. He believed that the company’s prospects were “easily” achievable.
It values Affirm at 8x estimated calendar 2025 revenue, while the stock currently trades at an “average 6x” multiple on that metric.
“We continue to believe in it [Affirm] is one of the most innovative names in our coverage universe and therefore the premium of approximately 2 rounds is deemed appropriate,” he wrote.
Dolev rates Affirm shares a Buy with a $65 price target.