Trading Ideas For Affirm Stock Before, After Q4 Earnings

Affirm Holdings, Inc AFRM is set to report fourth-quarter earnings after the market close on Thursday. The stock was trading mostly flat heading into the event.

When the financial technology company printed its third-quarter earnings after the close on May 12, the stock rallied 31% the following day.

For the third quarter, Affirm reported a quarterly loss of 19 cents per share on sales of $354.76 million, which beat the consensus estimate for a loss of 54 cents on sales of $344.03 million.

For the fourth quarter, Affirm guided its sales to come in between $345 million and $355 million. Analysts expect the company to print a quarterly loss of 59 cents per share on revenues of $354.8 million.

BofA Securities analyst Jason Kupferberg recently weighed in on Affirm. Kupferberg maintained a Buy rating on the stock and raised the price target from $39 to $45. The price increase is noteworthy because many large-cap stocks have seen lower price targets from analysts of late. 

From a technical analysis perspective, Affirm’s stock looks neutral heading into the event, having settled into a possible bear flag pattern on the daily chart but also printing a bullish double bottom pattern within the flag.

It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

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The Bull Case For Affirm: Affirm printed a bullish double bottom pattern near the $29 mark on Tuesday and Wednesday. On Thursday, the stock attempted to trade higher in reaction to the pattern, but lower-than-average volume was holding the stock down. The lower volume is likely due to traders and investors choosing to wait until after the earnings event before taking a position.

• If Affirm receives a bullish reaction to its earnings print, the stock will regain the eight-day and 21-day exponential moving averages (EMAs), which could give bulls more confidence going forward. The eight-day EMA is trending above the 21-day, which is bullish.
• Affirm has resistance above at $32.29 and $38.82.

The Bear Case For Affirm: Affirm may be settling into a bar flag pattern on the daily chart, with the pole formed between Aug. 16 and Aug. 22 and the flag printing over the days that have followed. If the bear flag becomes the dominant pattern, the measured move is about 30%, which suggests the stock could fall toward the $21 mark.

• Affirm is also trading in a possible downtrend after negating the prior uptrend that took place between June 17 and Aug. 16. If Affirm suffers a bearish reaction to its earnings print, Thursday’s high-of-day will serve as the lower high within the pattern to confirm the downtrend.
• Affirm has support below at $26.06 and $19.96 but may also find support at the 50-day simple moving average on the daily chart.

Photo courtesy of Affirm.