Affirm Q4 Earnings Preview: JPMorgan Names Buy Now, Pay Later Stock Among 'Top Fintech Picks' With 'Attractive Entry Point'

Fintech company Affirm Holdings Inc AFRM could provide a look at consumer financial health and the current growth of buy now, pay later (BNPL) for high-price items when fourth-quarter results are reported Wednesday after market close.

Earnings Estimates: Analysts expect Affirm to report fourth-quarter revenue of $603.66 million, according to data from Benzinga Pro.

The company reported revenue of $445.83 million in last year's fourth quarter. Affirm has beaten analyst estimates for revenue in five straight quarters and nine of the last 10 quarters.

Guidance from the company calls for fourth-quarter revenue to be in a range of $585 million to $605 million.

Analysts expect the company to report a loss of 51 cents per share, compared to a loss of 69 cents per share in last year's fourth quarter. The company has beaten earnings estimates from analysts in five straight quarters and six of the last 10 quarters overall.

Read Also: Affirm’s Growth Boosted by Apple and Amazon Partnerships, Lower Interest Rates: Analyst

What Analysts are Saying: Affirm could report a strong fourth quarter, but have guidance that comes in conservative, JPMorgan analyst Reginald Smith said ahead of the earnings report.

The analyst reiterated an Overweight rating and $45 price target on Affirm stock.

"AFRM remains one of our top fintech picks, based on its multi-year volume/revenue growth and margin expansion opportunity," Smith said.

The analyst said the fourth-quarter results could highlight volume, revenue and operating profit upside. The fear for Smith is that fiscal 2025 could come in conservative and send shares lower.

"We note AFRM typically issues conservative initial guidance (often excluding partnerships and product launches), leaving room to raise as the year unfolds."

Smith said momentum from Shopify and Amazon partnerships is likely to be sustained, with the Apple Pay deal recently announced a future catalyst.

The Apple Pay partnership is expected to go live in September 2024 along with further scaling of new products like the Affirm Card, the analyst added.

The analyst said they would be buyers "on any weakness after the quarter." With shares down over 30% year-to-date, the analyst said now could be an "attractive entry point."

"AFRM provides digital point-of-sale financing for some of the most iconic brands, marketplaces, and platforms and has become a market proxy for the once white-hot BNPL space."

Here are other analyst ratings for Affirm and their price targets:

• Mizuho: Reiterated Outperform rating, $65 price target
• Bank of America: Upgraded from Neutral to Buy, $36 price target
• JMP Securities: Reiterated Market Perform rating, no price target

Key Items to Watch: As mentioned above, Affirm's key partnerships with the likes of Shopify, Amazon and Apple could be among the key items to watch.

Affirm shares fell earlier this year with Walmart-backed fintech One offering buy now, pay later options inside some Walmart stores. Affirm had been the exclusive provider on buy now, pay later services for Walmart since 2019.

Customer partnerships could be a key item for investors and analysts to watch.

Another metric to watch will be overall gross merchandise volume and commentary on average ticket size, given the concerns on inflation and the overall consumer health.

Recent earnings reports from the likes of Walmart and Target showed market share gains based on consumers looking for value. The question will be if consumers are still purchasing high-ticket items and if they are using buy now, pay later to complete the transactions.

AFRM Price Action: Affirm stock trades at $32.49 on Tuesday, versus a 52-week trading range of $15.00 to $52.48. Affirm stock is up 80% over the last year.

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