Fed’s Powell opens door to potential rate cuts at Jackson Hole
On Tuesday, Morgan Stanley (NYSE:MS) maintained an Equalweight rating on Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM) but reduced the price target from $65.00 to $60.00. The adjustment was announced following a revision of earnings estimates by the firm’s analysts. The new target is based on a revised earnings per share (EPS) estimate that is burdened by share-based compensation (SBC) and warrants for the calendar year 2026. According to InvestingPro data, AFRM shows significant price volatility with a beta of 3.66, while trading at a price-to-book ratio of 6x, suggesting rich valuation levels.
The analysts cited several reasons for the revision, including an anticipated increase in operating expenses, a decrease in other income due to lower interest rates, and expectations of higher dilution. These factors led to an approximate 18% reduction in the firm’s CY26 SBC- and warrant-burdened EPS estimate. Despite this decrease, Morgan Stanley’s projections remain significantly above the consensus. Recent InvestingPro data shows the company maintaining strong revenue growth of 46% year-over-year, though it remains unprofitable with a -$0.63 EPS over the last twelve months.
The revised EPS estimate now stands at $2.04, down from the previous projection. In response to this change, Morgan Stanley applied a 29x target multiple to the new EPS estimate, an increase from the prior 27x multiple. This adjustment reflects the firm’s positive view on Affirm’s recent delinquency strength, the anticipation of continued 30%+ gross merchandise volume (GMV) growth, and a strategy that aggressively promotes the adoption of 0% annual percentage rate (APR) offerings. The company maintains robust liquidity with a current ratio of 12.29, while InvestingPro analysis indicates the stock is currently trading above its Fair Value. For deeper insights into Affirm’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Affirm Holdings Inc. specializes in providing digital and mobile-first commerce solutions. The company’s platform includes point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-focused app. Affirm’s business model is designed to facilitate seamless purchase experiences for consumers while helping merchants grow their sales. With a market capitalization of $16.7 billion and a Financial Health Score rated as "GOOD" by InvestingPro, the company demonstrates strong potential despite current profitability challenges.
The price target reduction by Morgan Stanley indicates a recalibration of expectations for Affirm’s financial performance in the coming years. The firm’s analysis suggests that while there are challenges ahead, there are also positive aspects to Affirm’s strategy and market position that could support its growth trajectory.
In other recent news, Affirm Holdings Inc. has been the focus of several analyst reviews and strategic partnerships. Affirm’s recent partnership with Stride Bank aims to expand its payment program through the Affirm Card, which offers consumers flexible payment options. This collaboration is expected to meet the growing demand for such financial solutions, with the Affirm Card already having 1.7 million active cardholders. On the analyst front, Evercore ISI initiated coverage on Affirm with an Outperform rating and a $50 price target, citing confidence in the company’s risk management and potential to expand its user base within the Buy Now, Pay Later sector. Similarly, TD Cowen began coverage with a Buy rating and also set a $50 price target, highlighting Affirm’s strong market position and impressive partnerships with companies like Amazon (NASDAQ:AMZN) and Shopify (NASDAQ:SHOP).
Additionally, Citizens JMP maintained its Market Outperform rating with a higher price target of $85, pointing to Affirm’s potential to scale operations and improve its net margin profile. The firm compared Affirm’s business model to that of Discover Financial Services (NYSE:DFS) and American Express (NYSE:AXP). Meanwhile, Klarna, a competitor, has postponed its IPO plans, which could impact the competitive landscape in which Affirm operates. These developments reflect Affirm’s strategic moves and the varied analyst perspectives on its growth potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.