Mizuho defends Affirm stock following WMT exposure concerns

On Tuesday, Mizuho (NYSE:MFG) Securities addressed concerns regarding Affirm Holdings Inc. (NASDAQ:AFRM), emphasizing that the recent market reaction might be disproportionate. The stock, which has shown significant volatility with a beta of 3.64, has declined over 21% year-to-date according to InvestingPro data. The commentary from Mizuho analysts came after scrutiny of Affirm’s exposure to Walmart Inc. (NYSE:WMT) due to the latter’s relationship with Klarna and OnePay.

The analysts at Mizuho highlighted two key points to support their defense of Affirm stock. Firstly, they noted that the partnership between Klarna and OnePay does not affect Affirm’s ongoing business with Walmart. Secondly, they suggested that Klarna’s financial incentives to Walmart, potentially involving warrants worth $400-500 million to purchase $20-25 million in return logistics technology company (RLTC), were likely a strategic move to secure Walmart’s business. Despite recent market concerns, InvestingPro data shows Affirm maintains strong liquidity with a current ratio of 12.29, indicating robust financial flexibility.

The financial relationship between Walmart and Klarna raised questions earlier about Affirm’s involvement with the retail giant. Affirm, a financial technology company, provides buy now, pay later services that allow consumers to make purchases and pay for them over time.

Mizuho’s comments aimed to clarify the situation, pointing out that Affirm’s business with Walmart remains intact despite the new developments with Klarna. The firm’s analysis attempted to quantify Affirm’s exposure to Walmart, considering the potential implications of the Klarna and OnePay relationship.

The market’s response to the news of Walmart’s dealings with Klarna was seen as potentially exaggerated, according to Mizuho. The firm’s defense of Affirm suggests confidence in the continued partnership between Affirm and Walmart and downplays the risk posed by the Klarna and OnePay deal.

Affirm Holdings Inc. has been a significant player in the buy now, pay later sector, partnering with major retailers to offer flexible payment solutions. The company’s stock performance is often influenced by news related to its key partnerships and market position. With revenue growth of 46.27% in the last twelve months and analyst price targets ranging from $45 to $85, Mizuho’s reassurance may provide some stability for investors concerned about the impact of Walmart’s financial arrangements with other payment service providers. For comprehensive analysis of Affirm’s financial health and growth prospects, investors can access detailed metrics and additional ProTips through InvestingPro’s extensive research platform.

In other recent news, Affirm Holdings, Inc. has reported that Walmart will partner with Klarna Group plc for installment loan financing services, introducing a direct competitor into the relationship. This shift is expected to make Klarna the exclusive buy-now-pay-later (BNPL) provider for Walmart in the U.S. by the end of the year. Despite this development, Affirm continues to maintain its existing relationship with Walmart, contributing to about 5% of Affirm’s Gross Merchandise Volume and around 2% of its Adjusted Operating Income for a recent six-month period.

Affirm has also expanded its partnerships, teaming up with StockX and Stitch Fix (NASDAQ:SFIX) to offer flexible payment plans to customers, reflecting a growing demand for such options in the apparel and accessories sectors. The partnership with StockX includes a promotional offer of 0% APR on certain payment plans, while the collaboration with Stitch Fix aims to enhance customer purchasing power with customized monthly payment plans. Additionally, Affirm has filed a new prospectus supplement with the Securities and Exchange Commission, detailing the legal framework for upcoming securities transactions.

These developments highlight Affirm’s strategic moves amid increasing competition in the BNPL space, particularly with Klarna’s anticipated public listing in the U.S. Affirm’s partnerships with retailers like StockX and Stitch Fix indicate its focus on expanding its merchant network and providing consumers with more payment flexibility.

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