On Friday, BMO (TSX:BMO) Capital Markets adjusted its outlook on Affirm Holdings Inc. (NASDAQ: NASDAQ:AFRM), reducing the price target to $46 from the previous $48, while retaining a Market Perform rating on the stock. The adjustment follows Affirm's third-quarter fiscal year 2024 results, which notably exceeded expectations, along with the company's raised guidance for the near term.
The change in Affirm's price target comes after the company's latest earnings report revealed lower-than-anticipated transaction and operating expenses, which helped to balance a slight slowdown in expected volume growth. This financial recalibration led to an increase in out-year estimates by up to 6%. Despite the positive performance in earnings, concerns were raised by bearish investors regarding a potential deceleration in volume growth and an increase in credit costs.
BMO's new target price for Affirm is based on a 7.5 times multiple of the company's projected 2025 tangible common equity (TCE), which is estimated to be around $6 per share. This valuation reflects the firm's analysis of Affirm's financial prospects and market conditions.
The updated guidance and financial estimates are a response to the company's performance in the third quarter of fiscal year 2024, which included significant beats on expected metrics. The revised figures take into account the latest operational and financial data reported by Affirm.
Affirm Holdings Inc. specializes in providing buy now, pay later solutions, offering consumers flexible payment options. The company's stock performance and financial health are closely monitored by investors and analysts, with changes in price targets and ratings providing insights into market expectations and company valuation.
InvestingPro Insights
With Affirm Holdings Inc. (NASDAQ: AFRM) surpassing expectations in its third-quarter fiscal year 2024 earnings, the spotlight is on its future financial trajectory. InvestingPro data shows a significant revenue growth of 40.05% over the last twelve months as of Q3 2024, and an even more impressive quarterly growth of 51.23% in Q3 2024, indicating a robust expansion in its business operations. The company's market cap stands at a solid $10.74 billion, reflecting investor confidence in its market position.
However, the landscape is not without its challenges. Affirm is trading at a high Price / Book multiple of 4.09, which suggests that the stock might be valued richly compared to its book value. Moreover, despite the high gross profit margin of nearly 65%, the company is grappling with a negative P/E ratio of -13.83, underscoring the fact that it is not currently profitable. This aligns with an InvestingPro Tip that analysts do not expect Affirm to be profitable this year, a sentiment that may weigh on investors' minds.
For those considering an investment in Affirm, it's worth noting that the stock is known for its high price volatility, an InvestingPro Tip that could be particularly relevant for risk-averse investors. On the positive side, another InvestingPro Tip highlights that the company's liquid assets exceed its short-term obligations, providing a buffer against financial uncertainties.
Investors looking to delve deeper into Affirm's financials and stock analysis can find additional insights and tips on InvestingPro, with a special offer using the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription. With over 10 additional InvestingPro Tips available, a more comprehensive understanding of Affirm's investment profile is within reach.
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