Friday - BTIG has initiated coverage on Affirm Holdings Inc. (NASDAQ:AFRM) with a Neutral rating, citing the company's sustainable growth yet investor expectations as a potential challenge. Affirm, known for its buy now, pay later services, has been recognized for its business model and the ability to manage credit effectively.
According to BTIG, Affirm's Gross Merchandise Volume (GMV) is expected to grow at a rate of 25-35% year-over-year, a pace that surpasses other lenders covered by the firm. The analyst noted that despite tighter credit underwriting leading to slower same-customer originations, the increase in new merchants partnering with Affirm has compensated for this deceleration.
The report also highlighted that market expectations could be a stumbling block for Affirm's share performance. Investors have perceived the company's guidance as conservative and are anticipating higher multiples of GMV growth over short periods. This disparity in expectations may continue to affect the stock until there is a shift in the investor base from payments to financial services.
Furthermore, BTIG pointed out that any indication of higher delinquencies or losses could result in immediate penalties for Affirm's stock value. The firm also mentioned that while management's comments in the first quarter of 2024 were misinterpreted, leading to a negative reaction in Affirm's share price, it suggests a cautious investor approach towards any strategies aimed at boosting loan growth.
In other recent news, Affirm Holdings Inc. has been a prominent feature in the financial landscape. The company reported robust growth in Gross Merchandise Value (GMV) despite rising interest rates, according to their latest earnings call. The Affirm Card is gaining traction, signaling the potential to capture a larger share of consumer spending.
On the analyst front, RBC Capital maintained its Sector Perform rating on Affirm with a steady price target of $43.00, while BMO Capital Markets adjusted its outlook, reducing the price target to $46 from the previous $48 but retaining a Market Perform rating.
In regulatory news, the U.S. Consumer Financial Protection Bureau (CFPB) announced an extension of certain consumer protection rules typically applied to credit cards to the Buy Now, Pay Later (BNPL) industry, a sector in which Affirm operates. These recent developments highlight the dynamic environment in which Affirm continues to navigate.
InvestingPro Insights
As Affirm Holdings Inc. (NASDAQ:AFRM) navigates a competitive financial landscape, real-time data from InvestingPro provides a comprehensive picture of the company's performance. With a market capitalization of $9.64 billion, Affirm showcases significant size within the sector. While the company's P/E ratio remains negative at -13.98, reflecting its growth-oriented investment phase, the adjusted P/E ratio has seen a slight improvement in the last twelve months as of Q3 2024, indicating a potential stabilization in earnings relative to its share price.
InvestingPro Tips highlight Affirm's robust revenue growth of 40.05% in the same period, outpacing many competitors and underscoring BTIG's expectations for the company's GMV growth. Moreover, the company's impressive gross profit margin of 61.84% suggests efficient cost management relative to its revenues. However, the negative operating income margin of -36.75% emphasizes the need for careful monitoring of operational efficiency and cost control measures.
For investors seeking a deeper dive into Affirm's financial health and future prospects, InvestingPro offers additional tips that can be accessed with a special offer. Use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain insights into how such metrics could influence investment decisions. Currently, there are several additional InvestingPro Tips available that can provide further guidance on Affirm's performance trajectory.
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