Affirm Holdings Selloff Is 'Baffling': Analysts Dive Into Financial Results

Shares of Affirm Holdings Inc AFRM were climbing in early trading on Thursday, after dropping more than 9% on Wednesday, after the company reported its fiscal third-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

JPMorgan On Affirm Holdings

Analyst Reginald Smith upgraded the rating from Neutral to Overweight, while raising the price target from $41 to $43.

The steep decline in Affirm's shares on Wednesday, despite the company posting another headline and operating margin beat and announcing a better-than-feared GMV outlook for the fiscal fourth quarter, "was baffling," Smith said in a note. Affirm Card active cardholders surpassed the one million mark, rising from 700,000 in the previous quarter, he added.

Pay Now is increasing as a percentage of Card GMV, "which may be a sign of progress towards becoming a top-of-wallet card," the analyst wrote. "In light of strong recent performance, Affirm is beginning to open their risk aperture, which includes offering better credits lower APRs to drive incremental GMV growth, as well as expanding their credit box at the margin," he added.

Goldman Sachs On Affirm Holdings

Analyst Michael Ng reiterated a Neutral rating, while lifting the price target from $20 to $21.

Affirm raised its full-year GMV guidance, "driven by the outperformance in the quarter & continued momentum in the business," Ng said. GMV growth accelerated for the fourth straight quarter to 36% year-on-year, with volumes from the company's top five merchants growing faster than the overall business, he added.

Affirm Card generated GMV of $374 million in the fiscal third quarter, "which currently has more than 1 million active card holders," the analyst wrote. "Affirm Card has seen strong use in categories that AFRM historically has not addressed (e.g., restaurants, groceries, fuel)," he added.

Check out other analyst stock ratings.

Mizuho Securities On Affirm Holdings

Analyst Dan Dolev reaffirmed a Buy rating and price target of $65.

The decline in Affirm's shares, following "a fantastic F3Q" with upbeat GMV and outlook, is likely in sympathy with Shopify Inc's SHOP stock, which fell on "soft guidance and opex concerns," Dolev said.

The reaction appears "overblown," as Shopify accounts for merely about 10% of Affirm's gross merchandize value versus around 20% for Amazon.com AMZN, the analyst states. "We believe the initial post-earning upward move in the stock is more appropriate for AFRM, and recommend buying on the strength of the fundamentals vs. kneejerk negative stock reaction," he added.

Needham On Affirm Holdings

Analyst Kyle Peterson maintained a Hold rating on the stock.

Affirm reported its quarterly results ahead of the Street’s expectations, "though most of the upside was due to lending-related revenue (interest, gain on sale, servicing), which we believe warrants a lower valuation from investors compared to network revenue," Peterson wrote in a note. He added that the company's allowance for credit losses rose on both a sequential and year-on-year basis.

"While delinquencies remain stable, we expect some increased anxiety in response to the higher allowance given the current stage of the credit cycle," the analyst further stated.

AFRM Price Action: Shares of Affirm Holdings were up 4.6% to $33.06 at the time of publication on Thursday.

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