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On Monday, Citizens JMP reiterated their optimistic stance on Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM), maintaining a Market Outperform rating and a price target of $85.00. Currently trading at $46.20, InvestingPro analysis suggests the stock is trading above its Fair Value, with analyst targets ranging from $45 to $85. The firm’s analysts drew parallels between Affirm, a short-term lender at the point of sale, and established financial services companies such as Discover Financial Services (NYSE:DFS) and American Express (NYSE:AXP), citing the similarity in their business models which also include capturing merchant fees and interest income.
The analysts expressed confidence in Affirm’s potential to scale its operations significantly within the next five years, anticipating that its net margin profile would eventually resemble that of Discover Financial Services, particularly in terms of Gross Merchandise Volume (GMV). This optimism is supported by Affirm’s impressive revenue growth of 46.27% over the last twelve months, though InvestingPro data indicates the company is not yet profitable, with analysts not expecting profitability this year. Based on these GMV growth assumptions, Citizens JMP projected a net income forecast for Affirm, applying a take rate and net margin in line with those of Discover Financial Services.
To determine the valuation, the earnings were discounted back, and a growth-oriented Price-to-Earnings (P/E) ratio of approximately 25 times was applied, leading to an $82 per share valuation. Additionally, the value of the company’s Net Operating Losses (NOLs) was factored in, contributing an extra $3 per share, culminating in the total price target of $85.
The endorsement from Citizens JMP comes as Affirm continues to navigate the competitive landscape of digital and short-term lending, where the ability to scale and maintain profitable margins is crucial. The firm’s analysis suggests that Affirm is on a promising trajectory to mirror the success of its more established counterparts within the financial industry. With a market capitalization of $14.79 billion and a price-to-book ratio of 5.31, investors seeking deeper insights into Affirm’s valuation and growth potential can access comprehensive analysis through InvestingPro’s detailed research reports, which provide expert analysis on over 1,400 US stocks.
In other recent news, Affirm Holdings Inc. announced a significant expansion of its credit reporting to Experian (OTC:EXPGF), which will include all of its pay-over-time products starting April 2025. This initiative is part of Affirm’s efforts to enhance transparency in lending and help consumers build their credit histories. Affirm’s partnerships with major financial players continue to evolve, as evidenced by its expanded agreement with J.P. Morgan Payments, allowing U.S. merchants to offer Affirm’s payment options. Furthermore, Affirm has secured a similar arrangement with Adyen (AS:ADYEN), extending its reach to U.K. merchants.
Analysts have expressed varied opinions on Affirm’s prospects. Goldman Sachs maintained a Buy rating with a $56 price target, while William Blair reiterated an Outperform rating, highlighting Affirm’s strong position in the buy-now-pay-later industry. BMO Capital Markets resumed coverage with an Outperform rating and a $69 price target, citing potential growth in Gross Merchandise Volume and Revenue Less Transaction (JO:NTUJ) Costs. UBS, on the other hand, maintained a Neutral rating with a $62 price target, noting Affirm’s ongoing role as a pay-over-time option for Walmart (NYSE:WMT).
The recent developments reflect Affirm’s strategic moves to strengthen its market position through partnerships and credit reporting initiatives. Despite economic challenges, analysts see potential growth opportunities for Affirm in the medium to long term.
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