On Wednesday, Mizuho (NYSE:MFG) Securities exhibited confidence in Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM), as the firm adjusted its price target for the company's stock to $78.00, an increase from the previous $69.00. The Outperform rating for the stock remains unchanged. The stock, currently trading at $66.32 with a market capitalization of $20.8 billion, has demonstrated remarkable momentum with a 66% return over the past year, according to InvestingPro data.
The revision in price target follows a comparative analysis between Affirm and its competitor Klarna, in light of Klarna's upcoming initial public offering (IPO). According to the analyst, despite Klarna being four times larger than Affirm in terms of Gross Merchandise Volume (GMV), their revenues are roughly equivalent, with Affirm rapidly closing the gap. Affirm's impressive revenue growth of 46.5% and healthy gross profit margin of 42.3% underscore its strong market position.
Affirm's revenue growth rate is approximately twice that of Klarna, a factor that contributes to the positive outlook. Furthermore, Affirm's emphasis on interest-bearing loans, which constitute about 75% of its GMV, compared to Klarna's focus on 'Pay-in-X' options, leads to Affirm boasting gross and net takes that are four times higher than those of Klarna.
The analyst also highlighted Affirm's profitability, noting that it is more than double that of Klarna, with an approximate 19% adjusted operating margin year-to-date, compared to Klarna's 8%. The raised price target to $78 from $69 reflects higher estimates based on the potential for international expansion and an increase in the valuation multiple.
Mizuho's updated valuation of Affirm indicates a robust financial position and promising growth trajectory, particularly as it competes in the global market against firms like Klarna. The price target uplift suggests a favorable outlook for Affirm's stock performance in the near future.
However, InvestingPro analysis suggests the stock may be trading above its Fair Value. Discover 10+ additional exclusive insights and detailed financial analysis in the comprehensive Pro Research Report, available with an InvestingPro subscription.
In other recent news, Affirm Holdings Inc. has seen an increase in stock price targets by BTIG, BofA Securities, and Mizuho Securities, with BTIG raising its price target to $81, BofA Securities to $74, and Mizuho Securities to $69. This follows the company's strong revenue growth of 46.5% and recent strategic moves such as expanding its merchant network by 20% and preparing for a UK market launch.
Analysts from these firms have highlighted Affirm's potential to increase its profit margin and earnings per share (EPS) by 2025, with BTIG suggesting an EPS of over $3 is attainable.
Additionally, Affirm recently completed a significant transaction with PGIM Fixed Income, involving a $500 million private purchase of loans. This development has strengthened the existing relationship between the two firms and leverages Affirm's rapid growth.
In other developments, Affirm has partnered with Visa (NYSE:V) to introduce a new payment feature in the United States called "Flexible Credential." This feature allows users to access multiple accounts and funding sources with one card, meeting the changing needs of consumers.
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