Wednesday saw RBC (TSX:RY) Capital Markets adjust its outlook on shares of Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM), increasing the price target from $52.00 to $67.00, while the stock maintained a Sector Perform rating.
The revision reflects a more optimistic view of the company's financial prospects. According to InvestingPro data, Affirm, currently valued at $19.25 billion, has demonstrated strong momentum with a 117.73% price return over the past six months.
RBC Capital's analysis suggests that Affirm may have greater operating leverage than previously estimated as the company scales up. This assessment has led to an upward revision of the firm's expectations for Affirm's GAAP operating income trajectory for the fiscal year 2026. The company has shown impressive revenue growth of 46.55% over the last twelve months, though InvestingPro analysis indicates it remains unprofitable during this period.
The decision to raise the price target is also influenced by an improving funding environment and a resilient consumer sector. These factors contribute to RBC Capital's projection of a stronger financial performance for Affirm in the coming years.
The new price target of $67.00 is set at 7 times the calendar year 2025 estimated enterprise value to revenue ratio. This valuation represents a premium compared to peers in the payments and financial services sector. RBC Capital justifies this premium with the anticipated significant increase in Affirm's GAAP operating income by the fiscal year 2026.
Affirm's stock price target upgrade reflects the firm's confidence in the company's potential for growth and profitability, as well as its ability to outperform within its industry.
In other recent news, Affirm Holdings has made significant strides in its business trajectory. The company issued $920 million in convertible notes, a move that has created a direct financial obligation.
Analyst firms have shown an increased interest in Affirm, with JMP Securities upgrading the company to Market Outperform and setting a target at $78. Deutsche Bank (ETR:DBKGn), Mizuho (NYSE:MFG) Securities, and BTIG also revised their price targets to $75, $78, and $81 respectively, reflecting the company's robust growth and strategic partnerships.
Affirm has also expanded its partnership with WooCommerce, integrating the company as a default payment option. This collaboration has led to a 45% increase in WooCommerce merchants utilizing Affirm's services. Furthermore, Affirm has broadened its relationship with Adyen (AS:ADYEN), a global financial technology platform, resulting in a sevenfold increase in average annual volume with over $125 million processed in payments.
Finally, Affirm has secured a significant capital partnership with investment firm Sixth Street, providing the company with up to $4 billion for its loans. This partnership is expected to enable Affirm to potentially issue over $20 billion in loans within the next three years. These are recent developments that highlight Affirm's strategic growth and strong market position.
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