Look past the mass layoffs, an earnings miss and yet another downbeat forecast, and perhaps you’ll find a glimmer of hope in Affirm Holdings Inc.’s latest report.
At least, that’s the view of some analysts who kept their bullish views on the buy-now-pay-later company in the wake of earnings that were helping to drag shares down as much as 21.9% in Thursday trading. Shares fell as low as $12.52 Thursday after closing at $16.02 before the report, and were most recently trading around $13.
See more: Affirm stock tanks after earnings whiff, as company plans to lay off 19% of staff
“We were disappointed” by the December-quarter results, wrote Mizuho analyst Dan Dolev, but there are nonetheless “several reasons to remain optimistic.”
Affirm’s
AFRM,
-17.85%
commentary on a pullback in spending might seem inconsistent with more upbeat views from payments players like Visa Inc.
V,
+0.20%
and Mastercard Inc.
MA,
+0.44%,
Dolev noted, but that could be due to the different mixes within those businesses. Affirm is likely more levered toward discretionary purchases, while Visa and Mastercard garner broader use.
Dolev was also encouraged by the decline in delinquencies that Affirm reported.
The company “is simply underwriting carefully,” he wrote, while keeping a buy rating on the stock but lowering his price target to $18 from $20. “Investors should cheer this behavior,” he added.
D.A. Davidson analyst Chris Brendler also called the results “broadly disappointing” but kept a buy rating on the stock.
“First, the lowered guide sets the bar lower, and we’re optimistic pricing initiatives will improve top line trends” in the second half of the fiscal year, he wrote. “Second, the improvement in credit quality is a big positive that ensures access to funding.”
Though Affirm’s report “has left investors questioning the viability of the entire [buy-now-pay-later] sector in this more hostile macro environment,” he left with a rising conviction that Affirm is “the long-term winner in the space.”
He still cut his price target to $20 from $24 in his note to clients.
SMBC Nikko Securities America analyst Andrew Bauch took a similar view of Affirm’s positioning in the market.
“While our Outperform rating (maintained) does not rule out the possibility that shares could materially underperform the group on macro in any given week/month, we believe that the gap that [Affirm] has created between themselves and other [buy-now-pay-later]/start-up-lenders continues to widen, and that building a position opportunistically in the current window is reasonable if investors are willing to accept this reality,” he wrote.
That said, he acknowledged that “bullish investors who have stomached the unprecedented volatility in shares over the last year will be disappointed to find that we’re still multiple quarters away from a set up where [Affirm] is not rapid fire reacting to” variables like rates, tough comparisons or questions about the company’s target for profitability on the basis of adjusted operating income as it exits fiscal 2023.
Bauch rates the stock an outperform with a $16 target price.
Jefferies analyst John Hecht, however, was less inclined to see rosier days ahead.
“We continue to find an absence of positive catalysts, and see risk of further multiple compression,” he wrote, while reiterating an underperform rating with a price target of $8.
RBC Capital Markets analyst Daniel Perlin downgraded the stock to sector-perform from outperform following the report, writing that “the combination of higher funding costs, latency effects of pricing actions, and expected deceleration into [gross merchandise volume and revenue for the second half of the fiscal year] points to a more challenging environment ahead, and although management reiterated its commitment to achieving [adjusted] operating income as the company exits [fiscal 2023], we are slightly less convinced that it will be successful.”
He lowered his target price to $17 from $23 in conjunction with the downgrade.
