Sometimes, all it takes is a kind word. Earlier this week, Goldman Sachs upgraded its Affirm Holdings (NASDAQ: AFRM) rating to a Buy and doubled its price target from $21 to $42. Following this move, shares moved up by 11.5%, going as high as $34.13 before closing at $33.70. Why the sudden change of heart? The newly appointed analyst cited the company’s “well-managed credit outcomes” and competitive underwriting, which lets the company separate customers’ different kinds of spending (cash flow management, debt spending, and short-term or long-term financing) from one card. The usual method of a single credit line is more costly to the borrower and presents greater risk to the lender. This price boost had a positive effect on investor perception.
Is Fintech Really A Hot Commodity?
The worldwide fintech market is expected to rise to $1.15 trillion by 2032 (currently around $340 billion). Key challenges for fintech are cybersecurity and increasing competition. As a BNPL (buy-now-pay-later) pioneer, Affirm has had a rocky ride but was able to withstand reductions, increased demand during the pandemic, and wild stock fluctuations. After a horrible 2022, losing 90% of its total value, the company made a major rebound in 2023. Its stock outperformed all U.S. tech with $5 billion or greater valuations, and shares soared by 400%. At the time, investors cited partnerships with Walmart, Amazon, and other retailers.
In 2024, Affirm shares are down 35%, compared to a 17% gain for the Nasdaq composite. However, the company recently announced a partnership with Apple that could expand Affirm’s market reach.
What The Analysts Are Saying
When it comes to AFRM, opinions are mixed. Some analysts have a positive outlook, while others are more cautious. Ratings run the gamut from bearish to bullish. In addition to Goldman Sachs, Mizhuo also rates it a Buy, while Compass Point declares it a Sell. There are two overweights and two neutral ratings, with three analysts giving AFRM a rating of “Sector/Market Perform.” The average price target is $37.44, with a high estimate of $65 and a low of $20. Currently, shares are trading down at $31.18.
Neither Dilantha DeSilva nor Stocks.News have positions in the companies mentioned in this article.
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Dilantha is a former buy-side equity analyst who now contributes to Seeking Alpha, GuruFocus, TipRanks, and ValueWalk. He is the founder of Beat Billions, a premium investment research subscription service on Seeking Alpha’s Marketplace. He has appeared on CNBC and Bloomberg to discuss stock markets and the global economy.