Welcome to Extreme Investor Network, where we provide unique insights into the world of investing. Today, we’re discussing Affirm and why investors shouldn’t be spooked by its recent post-earnings sell-off.
JPMorgan analyst Reginald Smith recently upgraded the buy-now-pay-later stock to overweight from neutral, following a drop in the stock price after its latest earnings report. Despite the sell-off, Smith remains bullish on Affirm, hiking his price target to $43, which implies a 36% upside from the previous close.
Affirm reported strong revenue numbers for the fiscal third quarter, beating analyst expectations. The company also issued positive guidance for the current quarter. However, shares dropped 9.5% following the report, with some attributing the decline to Shopify’s own drop in stock price.
Smith believes that the sell-off is not directly tied to Affirm’s performance, but rather external factors such as Shopify’s revenue growth concerns and a lack of disclosure around consumer debt on delayed payment platforms. However, he sees an opportunity for investors to buy in at a discount, with shares down more than 35% for the year.
One positive indicator for Affirm is the continued growth of Shop Pay, which houses its financing solutions. With volume growth exceeding 50% for another quarter, Smith views this as a positive signal for the company’s future prospects.
While Affirm may be considered “extremely volatile,” Smith remains optimistic about its long-term potential. As he put it, “The notion people are prioritizing BNPL repayment is actually good for companies like AFRM, and, we believe, speaks to the perceived utility of the product.”
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