Mizuho sees a "major positive catalyst" for Buy-rated Affirm Holdings (NASDAQ:AFRM), analysts told investors in a note Wednesday.
Mizuho analysts, who have an $18 price target on the stock, explained that over the coming months, AFRM could see a potential positive inflection in revenue less transaction costs (RLTC) as a % of GMV.
AFRM shares are trading over 3% higher at the time of writing.
"We foresee a trifecta of higher APRs boosting revenue, while a potential Fed pause/pivot and lower credit spreads lower the cost of borrowing," said the analysts. "We estimate together, these factors could turn from headwinds to tailwinds as soon as December."
They added: "AFRM's recent move to increase APR's for its interest bearing loans from 30% to 36% - where available - coupled with a potential inflection in spreads and interest rates on the funding cost side will be a tailwind to RLTC margins. All in, this should enable AFRM to consistently maintain RLTC margins in the 3-4% range."
The analysts believe that since AFRM stock tends to follow changes in RLTC, they consider "a potential positive inflection in RLTC as a % of GMV to be a major positive catalyst for the stock."