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On Tuesday, Evercore ISI initiated coverage on shares of Affirm Holdings Inc. (NASDAQ:AFRM) with an Outperform rating and a price target of $50.00, representing significant upside from the current price of $36.42. The move comes as a bold stance amidst a challenging economic environment for consumer credit companies. According to InvestingPro data, the stock has experienced substantial volatility, having fallen 38% year-to-date, though it remains well above its 52-week low of $22.25.
The firm's analysts, led by Adam Frisch, expressed confidence in Affirm's risk management capabilities, which they believe surpass those of its peers. According to Frisch, the company is strategically positioned to expand its user base and product offerings within the rapidly growing Buy Now, Pay Later (BNPL) sector. InvestingPro analysis shows the company maintains strong liquidity with a current ratio of 12.29, while revenue growth remains robust at 46% year-over-year. Discover more insights about Affirm's financial health and growth prospects in the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Despite the looming macroeconomic concerns and soft data indicators, Evercore ISI suggests that consumer spending and delinquency trends have remained relatively stable. While InvestingPro data indicates the company is not yet profitable, with a negative EBITDA of $103.91 million in the last twelve months, Frisch remarked on the potential for Affirm to emerge stronger if traditional credit becomes less accessible to consumers. The company's gross profit margin of 44.46% and strong revenue growth trajectory suggest potential for future profitability, though the current valuation reflects a significant sell-off and fails to acknowledge its improved credit facilities and the enduring appeal of BNPL services.
Evercore ISI's analysis also includes insights from John Pancari, an analyst specializing in regional banks and specialty finance. Together, they provided an overview of Affirm's funding strategy, which may seem complex to those unfamiliar with various lending vehicles and balance sheet exposures.
The endorsement by Evercore ISI reflects an optimistic view of Affirm's future, despite the "macro storm clouds" that have cast doubt on the broader consumer credit market. The analysts at Evercore ISI are taking a contrarian view to the consensus, suggesting that the current macroeconomic weakness could, in fact, benefit BNPL companies like Affirm if traditional credit sources retract.
In other recent news, Affirm Holdings Inc. has been the focus of several significant developments. Affirm announced an expanded partnership with J.P. Morgan Payments, allowing U.S. merchants on J.P. Morgan's Commerce Platform to offer Affirm's payment options at checkout. This agreement enhances Affirm's real-time underwriting capabilities, providing consumers with flexible payment plans. Additionally, Affirm has partnered with Stride Bank to issue the Affirm Card, which offers both upfront and installment payment options and is accepted wherever Visa (NYSE:V) is accepted.
Analyst firms have also shown interest in Affirm's potential. TD Cowen initiated coverage with a Buy rating and a $50 price target, citing Affirm's strong position in the Buy Now, Pay Later market and its partnerships with major e-commerce players like Amazon (NASDAQ:AMZN) and Shopify (NASDAQ:SHOP). Citizens JMP maintained a Market Outperform rating with an $85 price target, drawing parallels between Affirm and established financial services companies. Meanwhile, Goldman Sachs reiterated a Buy rating with a $56 price target, highlighting the importance of Affirm's strategic partnerships with major payment service providers like J.P. Morgan and Adyen (AS:ADYEN).
These partnerships and analyst endorsements underscore Affirm's efforts to expand its reach and leverage its position in the digital lending space. The developments reflect a growing interest in Affirm's business model and its ability to scale operations in a competitive market.
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