Shares of Affirm Holdings Inc. have cratered 69% from their closing high in November, and one analyst says that steep drop is “overdone.”
D.A. Davidson’s Chris Brendler upgraded Affirm’s shares AFRM,
Shares are up about 3% in premarket trading Friday.
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“Although we still have concerns about credit/valuation (still super expensive for a lender), we see so much estimate upside that we just have to be on board,” Brendler wrote.
Brendler expects that the company benefited from a strong holiday shopping season as more consumers grew comfortable making purchases in installments. While his volume estimates for the quarter are in-line with the consensus view, he sees room for Affirm to deliver upside on stronger consumer spending, a travel rebound, and benefits from its Amazon.com Inc. AMZN,
“Although there is little visibility on Amazon at this early stage, this should also
improve with 2Q results,” he wrote, referring to the company’s December quarter. The company is due to report earnings on Feb. 10.
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Brendler sees Affirm as better positioned than some of its peers to handle new competitive dynamics in the industry. Though the chief executive of privately held rival Klarna recently cited declines in merchant fees due to competition in a Bloomberg interview, Brendler noted that Affirm has been reducing the portion of revenue that it derives from merchant fees. It also has a “unique ability to do consumer-funded (interest-bearing) BNPL,” he said.
Brendler cut his price target on Affirm’s stock to $75 from $110 in conjunction with the upgrade, pointing to “macro conditions.”
Affirm shares have declined 69% over the past three months as the S&P 500 SPX,
