Affirm Card Launch and Q4 Performance: Analyst Sees More Upside

Mizuho analyst Dan Dolev maintained Affirm Holdings Inc AFRM with a Buy and raised the price target from $20 to $25.

AFRM reported a solid 4Q, with major KPIs ahead of guidance, RLTC (revenue less transaction costs) as a % of GMV maintaining within the expected 3%-4% range, and delinquencies improving again. 

Dolev is particularly encouraged by the early results of the Affirm Card (previously Debit +), which he highlighted before earnings in July. 

His analysis shows significant potential to drive incremental GMV growth in the medium term as the card is adopted by more of AFRM's 16.5 million customers (active cardholders were about > 300K as of mid-August). AFRM guidance appears more upbeat than expected, even with several potential negative catalysts baked into assumptions (student loan payment re-start headwinds, negative consumer sentiment). 

The analyst sees potential upside and is incrementally more bullish on the opportunity into AFRM's upcoming FY24. 

Dolev updated FY24 and FY25 estimates based on 4Q results and management's fresh guidance. 

He raised FY24 revenue and adjusted operating income to $2.12 billion and $58 million from $2.11 billion and $(124) million, respectively. 

The analyst raised FY25 revenue and adjusted operating income to $2.57 billion and $94 million from $2.56 billion and $(91) million, respectively. 

He believes that trading ahead of the peer group (13x) is appropriate given AFRM's position as the market leader in BNPL and continues to improve on adjusted profitability prospects.

Price Action: AFRM shares traded lower by 0.05% at $21.85 on the last check Tuesday.