PreMarket Prep Stock Of The Day: Affirm

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Sympathy plays happen when the share price of a company is positively or negatively impacted by news delivered by another company. These scenarios can play out immediately or longer-term or sometimes in both time frames.

Shareholders that invested in Affirm Holdings Inc. AFRM earlier this month are being rewarded in Monday’s session. The corresponding price action following its partnership with Amazon.com AMZN makes it the PreMarket Prep Stock Of The Day.

The Company: Affirm offers a platform for digital and mobile-first commerce. It comprises a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app. The firm generates its revenue from merchant networks, and through virtual card networks among others.

On Investors Radar: Before the open on Aug. 2, Square SQ announced it was acquiring Afterpay for approximately $29 billion in stock. The deal was an all-stock transaction.

Since the company was one of the leaders in the growing “buy-now-pay-later” space, investors were on the lookout for similar companies. These buyers were banking on either a buyout or partnership with a larger company.

On that same day, Affirm bolted from $56.32 to $64.71 and two days later closed at $68.22.

Forgotten About: As so often happens when an issue jumps on excessive speculation of a potential deal or partnership that doesn't immediately come to fruition, the issue will retreat in price. This was the case with Affirm, which retreated put in a trio of lows at the $62 area following the initial run-up.

The issue did spike to $74.18 on Thursday but ended the week at $67.90, which was just off the low for the week ($66.10).

Friday Night News Dump: After Friday's close, the company announced its flexible payment solution will soon be available to Amazon.com customers at checkout. Amazon and Affirm are testing with select customers now, and in the coming months, Amazon plans to make Affirm more broadly available to its customers.

In after-hours trading, the issue spiked to $103 and ended the after-hours session at $92.08, which was 36% higher than its close for the session.

See Also: How Affirm's Amazon Partnership Could Launch Stock Into High Orbit

A Bullish Thesis: Sean Udall of Quantum Trading Strategies is bullish on the company moving forward.

Udall compares the company to Alphabet Inc GOOG, Redfin Corp RDFN and Elastic ESTC.

"As a category leader in a space which has much higher potential durable growth, which equates to a very large TAM (total addressable/available market," Udall said, "I liked the company at the IPO, but I didn't like the price. When it dropped from the $140s to sub $60, I then liked both the company and the price.”

Udall is reevaluating his long-term price target. It was $84.50 (from its $46.50 bottom) but is now under review. As for re-entering: "I was thinking of attacking a fade to the mid $80s but it didn't even come close today. So 'where to re-enter' is also under review.”

Price Action: After a higher open, the issue raced to $99.50 and reversed course. It had a brief decline to $91.28 and rebounded to make a new high at $101.

As of 3 p.m. ET, it's attempting to remain in the triple digits.

Posted In: TechnicalsTrading Ideas