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Affirm Holdings (AFRM) had a blockbuster IPO at the beginning of this year. Its stock nearly doubled from its IPO price of $49 on the day of listing. Furthermore, the euphoria lasted for a month and drove its price even higher as the company crafted a high of $146.90 on February 10.
The fintech company provides buy now, pay later (BNPL) services. Favorable industry trends, strong merchant and consumer base, solid gross merchandise volumes, high retention rates, strength in recurring revenues, and increased average order value led to stellar growth for the stock.
However, since then, Affirm stock has trended lower, losing approximately 60% from its peak. (See Affirm Holdings stock charts on TipRanks)
The broader market selloff, high valuation, increased operating losses, and growing competitive activity has taken a toll on its stock price. Recently, Bloomberg reported that Apple partnered with Goldman Sachs to enter the BNPL market. This has further dragged Affirm stock lower.
Having lost a substantial amount of value, and with competition heating up, the question arises whether Affirm stock will sink even further?
Mizuho Securities analyst Dan Dolev thinks otherwise. While Dolev agrees that “Apple Pay adds competition,” he sees Affirm as “less vulnerable,” which is why he reiterated his Buy rating on the stock. However, increased competitive activity has led Dolev to reduce his price target on the stock to $76 (28.8% upside potential) from $90.
In a note to investors, Dolev said, “We maintain our positive view of AFRM despite the entrance of Apple Pay as a major competitor. We believe AFRM is less vulnerable to Apple Pay than other popular BNPL services due to its high AOV ($450-500 vs. Apple Pay’s $68) and lower customer overlap with Apple Pay relative to other popular BNPL services. However, we believe increased competition from Apple Pay and customer elasticity indicated from the survey merit a lower valuation multiple and a trim to our upside potential for the stock.”
Overall, Affirm stock has a Moderate Buy consensus rating based on 8 Buys, 4 Holds, and 1 Sell. The average Affirm Holdings price target of $73.62 implies 24.8% upside potential from current levels. Affirm has an ‘Outperform’ Smart Score of 8 out of 10.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.