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Tuesday, Compass Point analysts upgraded Affirm Holdings Inc. (NASDAQ:AFRM) stock rating from Sell to Neutral and significantly raised the price target to $61 from $20. The upgrade reflects a revised valuation model and a more optimistic outlook on the company's growth and profitability prospects. According to InvestingPro data, Affirm has demonstrated strong revenue growth of 46.55% over the last twelve months, though analysts note the company is not expected to be profitable this year.
The analysts highlighted Affirm's capacity to re-accelerate growth and benefit from operating leverage, which they had previously underestimated. They now expect Affirm's adjusted operating income margin to reach 30% in FY27E, up from the previously estimated 24% for FY25E. This improvement is anticipated due to the company's ability to leverage past marketing expenses, which are driving recurring member engagement and an increase in average transactions per member. With a market capitalization of $17.33 billion, Affirm maintains strong liquidity with a current ratio of 17.58, indicating robust short-term financial health.
The analysts also noted the "flywheel benefit" of sustained higher growth over multiple quarters. This momentum is expected to drive significant expense leverage, potentially bringing Affirm to GAAP profitability as early as the third quarter of FY25.
In addition to operational efficiencies, Affirm has secured considerable incremental funding capacity, which is seen as a key factor in supporting its growth trajectory. Furthermore, the company has demonstrated superior credit management compared to its peers, even amidst higher growth rates.
The updated price target of $61 is based on 3.0x the year-end 2026 estimated tangible book value (TBV) per share of $20.32. The analysts believe that Affirm's strong performance will continue to bolster the stock, and that successful execution in the near term could provide additional upside potential. Based on InvestingPro's Fair Value analysis, the stock appears to be trading above its intrinsic value. Investors should note that analyst targets for the stock range widely from $20 to $82, with the company's next earnings report due in 9 days. Get deeper insights and access to comprehensive valuation metrics with InvestingPro's detailed research report, available for over 1,400 US stocks.
In other recent news, Affirm Holdings, Inc. has reported significant developments in its financial landscape. The company has expanded its forward flow loan purchase program with Liberty Mutual Investments, potentially reaching up to $750 million. Affirm also issued $920 million in convertible notes, creating a direct financial obligation.
RBC Capital Markets raised Affirm's stock target, reflecting a more optimistic view of the company's financial prospects, backed by a strong revenue growth of 46.55% over the last year. Needham maintained its Hold rating on Affirm, analyzing whether the fintech company would benefit from acquiring a bank or applying for an Industrial Loan Company charter.
Furthermore, the company expanded its alliance with WooCommerce, integrating as a default payment option, leading to a 45% increase in WooCommerce merchants utilizing Affirm's services. Analyst firms including JMP Securities, Deutsche Bank (ETR:DBKGn), Mizuho (NYSE:MFG) Securities, and BTIG showed increased interest in Affirm, upgrading the company's stock status and revising their price targets upwards. Lastly, Affirm secured a substantial capital partnership with investment firm Sixth Street, providing up to $4 billion for its loans. These are all recent developments, highlighting Affirm's strategic growth and strong market position.
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