Affirm Holdings Inc.’s stock had experienced an impressive rally of approximately 125% in the three months leading up to its latest earnings report. However, this surge in value may have set expectations too high for investors, resulting in disappointment.
While Affirm managed to surpass expectations with its fiscal second-quarter results, Wall Street was taken aback by the company’s outlook for the second half of the fiscal year. The forecast implied a slowdown in growth concerning revenue, adjusted operating income, and gross merchandise volume. This revelation prompted Piper Sandler’s Kevin Barker to suggest that the bar had been set too high initially. He maintained his underweight rating on the stock but increased his target price from $14 to $19.
Consequently, Affirm shares experienced a decline of over 13% on Friday.
According to Wells Fargo’s Andrew Bauch, the report for the December quarter contains points of interest for both bullish and bearish investors.
“Bullish investors remain emboldened by Affirm’s exceptional execution in recent periods,” Bauch explained. “However, bearish investors may point to the company’s elevated valuation levels as a reason to avoid owning shares.”
Bauch believes that debates over Affirm’s valuation are ultimately fruitless, as the company lacks a genuine publicly traded peer for comparison.
Affirm: Mixed Opinions on Stock Valuation
Bauch Remains Positive, Doubles Price Target
In a recent report, Bauch maintained an equal-weight rating on Affirm’s shares but raised his price target from $20 to $40. Despite acknowledging the market’s current dissatisfaction, Bauch highlighted the unpredictable nature of stock prices, which are influenced by market momentum.
Faucette Questions Stock’s Overvaluation
However, James Faucette from Morgan Stanley presented a contrasting opinion. He argued that the stock appeared overvalued, as the company’s rate of improvement did not justify its current valuation. Faucette maintained an underweight rating on the stock and set a target price of $20.
Dolev Sees Buying Opportunity
On the other hand, Dan Dolev from Mizuho saw Friday’s stock selloff as a potential opportunity for investors. He expressed confidence in Affirm’s outlook and described the company’s goals as “easily” achievable. Dolev valued Affirm at 8 times estimated revenue for calendar 2025, suggesting the stock was trading at a reasonable multiple. He rated Affirm shares as a buy with a target price of $65, emphasizing the company’s innovative nature.
Despite differing opinions on Affirm’s valuation, it is clear that analysts are closely monitoring the company’s performance and have varying outlooks on its future.