Affirm Holdings Inc (NASDAQ: AFRM) gained more than 10% on Monday after a Goldman Sachs analyst issued a super bullish note in its favour.
Shares of the buy now, pay later company are still over 30% for the year.
Affirm stock could climb to $42
Will Nance initiated coverage of Affirm Holdings today with a “buy” rating. His $42 price objective suggests a 40% upside on its previous close.
The analyst is constructive on AFRM shares as he expects “strong growth rates to support its premium valuation in the intermediate term”.
Affirm stock, he added, is well-positioned to capitalise on continued growth in the BNPL solutions in the United States – the primary market of the San Francisco-headquartered firm.
Shares of Affirm Holdings Inc do not currently pay a dividend, though.
Why else are AFRM shares worth owning?
Will Nance recommends owning Affirm stock on its differentiated approach to underwriting. His research note also reads:
AFRM’s credit losses in the 7.0% range are comparable with subprime losses at incumbents, but have been much more stable recently while the industry has seen credit normalisation in the wake of the pandemic.
The aforementioned strength, the analyst added, ensures greater pricing flexibility for Affirm Holdings versus traditional lenders as well. Other reasons cited for the bullish view on AFRM include its ability to manage its revenue less transaction costs margins.
All in all, Nance is confident that the best-in-class fundamentals of Affirm Holdings Inc give it a meaningful edge over rivals.
Affirm topped estimates in its fiscal Q3
Earlier in June, Affirm teamed up with Apple Pay to bring its buy now, pay later loans to users of iPhones and iPads. That could help accelerate growth moving forward, as per the Goldman Sachs analyst.
Watch here: https://www.youtube.com/embed/3WX5nH8jUaw?feature=oembed
Will Nance is positive on AFRM’s other partnerships including with Amazon and Shopify as well. The financial technology company has launched a new Debit+ card that could also serve as a catalyst for its stock price, he added.
The bullish note on Affirm shares arrives more than a month after the fintech reported its financial results for the first quarter that topped Street estimates. Max Levchin – chief executive of the Nasdaq-listed firm said at the time:
Our consumers love Affirm. We cannot wait to deliver a few more amazing products and services in the coming weeks and months for them – and for the merchants where they shop. We feel quite comfortable executing in the current economic and interest rate environment. We remain firmly in control of credit outcomes.
Affirm stock traded at a high of $164 during the pandemic.
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