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Investing.com - Needham has reiterated its Hold rating on Affirm Holdings Inc. (NASDAQ:AFRM), the $21.65 billion market cap buy-now-pay-later company showing 42.5% revenue growth, as analyst Kyle Peterson expressed concerns about potential impacts from Walmart (NYSE:WMT)’s possible transition to Klarna/OnePay. According to InvestingPro analysis, the stock appears overvalued at current levels.
The firm highlighted near-term risk-reward considerations for the buy-now-pay-later provider, specifically pointing to potential revenue challenges for fiscal year 2026 if Walmart fully shifts to competitor Klarna/OnePay in the coming year.
Needham expects some Walmart transaction volume to begin moving to Klarna/OnePay in upcoming quarters, which could reset top-line numbers lower for FY26.
The research note also warned that a higher mix of non-interest-bearing transactions is likely to put pressure on RLTC (revenue less transaction costs) margins, though the firm characterized Walmart as "only marginally profitable" for Affirm.
While Needham does not view these as long-term concerns, it anticipates near-term volatility in Affirm shares as financial estimates recalibrate in coming weeks, supporting the decision to maintain the Hold rating.
In other recent news, Affirm has announced a series of significant developments. The company reported generating over $33 billion in gross merchandise volume for the twelve months ending March 31, 2025, and its total funding capacity reached $23.3 billion, marking nine consecutive quarters of increased capacity. Affirm has expanded its capital partnership with PGIM Fixed Income through a new $3 billion revolving loan facility, allowing the purchase of up to $500 million of Affirm loans at any given time. This move follows PGIM’s previous $500 million investment in Affirm loans. Additionally, Affirm has extended its capital partnership with Moore Specialty Credit Platform until May 2027, with Moore having invested nearly $5 billion in Affirm’s assets since 2017.
In another development, Affirm has partnered with Xsolla to offer flexible payment options to gamers, allowing purchases to be split into interest-free installments. This partnership will soon expand to Canada and the United Kingdom (TADAWUL:4280). Affirm has also secured a deal with Prudential (LON:PRU) Financial (NYSE:PRU)’s investment arm to purchase up to $500 million in consumer loans, with provisions to re-lend the investment, effectively financing $3 billion of buy-now-pay-later loans. These partnerships and expansions highlight Affirm’s ongoing efforts to broaden its financial services and maintain its position in the competitive buy-now-pay-later market.
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