On Thursday, Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM) maintained its Buy rating and $46.00 price target from Goldman Sachs. The fintech company's recent quarterly results surpassed the required loan to cost (RLTC) by 22%, or 6% after adjustments for one-time securitization-related gains. Affirm's forward-looking guidance was also notably stronger than anticipated, suggesting potential for further financial outperformance.
The company's outlook was highlighted as particularly positive, with projections exceeding market consensus. This indicates a strategy of setting a minimum expectation for financial outcomes, which could imply additional upside potential. Affirm's commitment to achieving sustained GAAP profitability by the fourth quarter of 2025 was also underlined, expected to be supported by another year of significant operating leverage.
Affirm's performance and guidance have reinforced the company's trajectory towards continued growth. The company is expected to maintain a 30% growth in Gross Merchandise Volume (GMV) in the near term, while keeping operating expenses (opex) growth moderate. This approach is anticipated to drive further RLTC and gross profit to the bottom line, which is likely to support an increase in GAAP Earnings Per Share (EPS) over time.
The analyst's outlook on Affirm remains positive, with expectations that the company's strategy will effectively translate into tangible earnings growth. This is seen as a factor that could gradually strengthen the company's valuation and address some of the concerns regarding the long-term trading multiple of the business.
In other recent news, Affirm Holdings Inc. has reported a strong fourth quarter for the fiscal year 2024, marked by significant growth and profitability. The company's guidance for fiscal 2025 indicates a strategy to surpass conservative credit outcome targets.
The company also announced leadership changes, with CFO Michael Linford taking on the role of Chief Operating Officer and Rob O'Hare set to become the new CFO.
A potential decline in interest rates is viewed as an opportunity for Affirm to enhance approval rates and user engagement. The company plans to maintain a stable RLTC rate and identifies the mix of business, credit outcomes, and capital market execution as crucial for performance in the upcoming year.
Affirm is also focusing on driving growth by increasing annual spend per Affirm card and active cards. The company acknowledges the challenges of underwriting and competition in the BNPL space, but is leveraging its machine learning capabilities for underwriting and has a strong sales team for merchant acquisition. CEO Max Levchin expressed confidence in the company's strategic direction and highlighted the ongoing development of the Affirm Card.
InvestingPro Insights
As Affirm Holdings Inc. (NASDAQ: AFRM) continues to attract attention with its strong forward-looking guidance and commitment to profitability, insights from InvestingPro reveal a nuanced picture of its financial health. With a market capitalization of $10.05 billion, Affirm's growth narrative is underscored by a significant revenue increase of over 40% in the last twelve months as of Q3 2024. This growth trajectory is further highlighted by a robust gross profit margin of 61.84% in the same period.
InvestingPro Tips suggest that while Affirm's stock price has experienced high volatility and the company is not expected to be profitable this year, its liquid assets do exceed short-term obligations, offering some financial stability. Moreover, the company has achieved a strong return over the last month, up 17.66%, despite not paying dividends to shareholders. For investors looking to delve deeper into Affirm's potential, there are additional InvestingPro Tips available, which can be explored for more strategic insights.
These financial metrics and expert analyses can provide investors with a comprehensive understanding of Affirm's current position and future prospects. For those considering an investment in Affirm, or simply tracking the fintech space, the data and tips from InvestingPro offer valuable context to the company's recent performance and analyst expectations.
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