Mizuho reiterates Outperform rating on Affirm stock on potential profitability

On Tuesday, Mizuho reiterated its Outperform rating on shares of Affirm Holdings Inc. (NASDAQ:AFRM) with a price target of $65.00. The firm anticipates that Affirm, which operates on a fiscal calendar ending June 30, will provide guidance for fiscal year 2025 during its Wednesday announcement. Current market consensus suggests a GAAP loss for FY25.

However, Mizuho projects that Affirm could achieve GAAP operating income profitability by the fourth quarter of FY25. This outlook is based on expectations of reduced warrant expense burden in the second half of the fiscal year, lower interest rates, and benefits from scaling operations, even before any additional gains from Apple (NASDAQ:AAPL) Pay BNPL (Buy Now Pay Later) volumes.

In a recent report, Mizhuo offered a hypothetical analysis to demonstrate what achieving GAAP profitability by the end of FY25 might look like. This scenario, if realized, could significantly surpass both the consensus estimates and Mizuho's own expectations. The firm believes that the potential for Affirm to reach GAAP profitability by F4Q 2025 could markedly increase the stock's appeal to investors.

Affirm's progress towards GAAP profitability is being closely watched as it approaches its fiscal year 2025 guidance release. The company's performance and strategic direction could have implications for its valuation and investor sentiment.

Mizuho's analysis suggests that with the anticipated reduction in expenses and an improving scale of operations, Affirm is on a path that could lead to a positive shift in its financial standing. The anticipation of this improvement is reflected in the maintained Outperform rating and $65 price target for Affirm's stock.

In other recent news, Affirm Holdings has seen a flurry of activity, with significant developments in business partnerships, financial management, and analyst ratings.

The company has expanded its partnerships with Hotels.com and RONA, offering flexible payment options to customers and extending its reach in the travel and home improvement industries. Furthermore, Affirm has boosted its borrowing capacity from $205 million to $330 million, reflecting a commitment to long-term growth.

Morgan Stanley has maintained an underweight rating on Affirm, expressing skepticism despite trends from partners like Amazon (NASDAQ:AMZN) and Shopify (NYSE:SHOP) that could drive volume growth. The firm also noted potential challenges Affirm may face in maintaining or increasing yields on its platform portfolio. In contrast, Goldman Sachs upgraded Affirm to a 'buy' rating, citing the company's effective credit management, while JMP Securities initiated coverage with a Market Perform rating.

These developments come amidst various projections for Affirm's future revenues. CFRA maintained a 'sell' rating, forecasting revenues for the fiscal years 2024 to 2026 at $2.3 billion, $2.7 billion, and $3.2 billion respectively.

InvestingPro Insights

As Affirm Holdings Inc. (NASDAQ:AFRM) approaches its fiscal year 2025 guidance, real-time data from InvestingPro provides a deeper look into the company's financials and market performance. An InvestingPro Tip highlights that Affirm's stock price movements have been quite volatile, which may be of interest to investors considering the potential for GAAP profitability by the end of FY25. Despite this volatility, Affirm has seen a significant return over the last week and month, with price total returns of 8.84% and 17.64% respectively. This could be indicative of growing investor confidence as the company nears its guidance announcement.

The company's revenue growth remains robust, with a 40.05% increase over the last twelve months as of Q3 2024, which may support Mizuho's positive outlook. However, with a P/E ratio of -14.3 and analysts not anticipating profitability this year, the journey towards GAAP profitability by FY25's end will be critical to watch. Additionally, Affirm's liquid assets exceed short-term obligations, which could provide some financial flexibility in the near term.

For investors seeking a comprehensive analysis, there are additional InvestingPro Tips available, offering insights into Affirm's performance metrics and future outlook. With these tools, investors can make more informed decisions as they assess the potential for Affirm to reach GAAP profitability and the impact on its stock valuation.

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