Affirm Holdings (AFRM) has signed a lucrative new loan deal worth $5 billion.
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The largest buy now, pay later (BNPL) company in the U.S. announced a loan deal with Liberty Mutual Group of Insurance Cos. that builds on an existing partnership between the two companies. Under terms of the deal that runs through June 2027, Liberty Mutual will purchase Affirm’s installment loans in amounts up to $750 million. Over time, Liberty plans to invest as much as $5 billion in the program.
This new deal follows a similar one announced last December, when Affirm and Sixth Street (TSLX) entered into a long-term capital partnership in which the investment firm, through its asset-based finance platform, will invest up to $4 billion by purchasing Affirm loans over three years.
Loan Details
These type of loan deals are quite common and a way for Affirm Holdings to access the capital it needs to make more BNPL loans to consumers. Analysts tend to look at these deals favorably as they help Affirm to grow its business making short-term loans to consumers while reducing risk.
The BNPL market is currently valued at about $30 billion. While it continues to grow, the rate of growth has tapered off from a few years ago. AFRM stock has climbed 38% over the past year after suffering a steep decline coming out of the Covid-19 pandemic.
Is AFRM Stock a Buy?
Affirm Holdings stock has a consensus Moderate Buy rating among 18 Wall Street analysts. That rating is based on 11 Buy and seven Hold recommendations issued in the last three months. The average AFRM price target of $68.69 implies 22.81% upside from current levels.
