Wall Street is buzzing about Apple (NASDAQ:AAPL), and it’s understandable if you’re interested in Apple stock. However, there’s a perfect opportunity to pair your Apple shares up with Affirm Holdings (NASDAQ:AFRM) stock. I am bullish on AFRM stock, and I think investors should be excited about Affirm’s financials and a game-changing deal with Apple.
Affirm Holdings is a fintech business that specializes in “buy now, pay later” (BNPL) payment processing. Indeed, I’d say that anyone seeking direct portfolio exposure to the BNPL trend, which is red-hot in the 2020s, ought to conduct their due diligence on Affirm.
At the same time, Affirm stock is curling up and breaking out of a year-and-a-half-long downtrend. After delving into Affirm Holdings’ financial facts, you’ll surely agree that the stock went down too far and is probably due for a comeback.
The Irrational Drop in Affirm Stock
Why did short-term traders sell AFRM stock earlier this year? Most likely, they were jittery about the impact of inflation, which is understandable. However, today’s consumer price index (CPI) report indicates that inflation is slowly but surely cooling.
However, the drop in Affirm Holdings stock wasn’t entirely due to macroeconomic concerns. A month ago, Affirm released its results for the third quarter of Fiscal Year 2024. Those results beat Wall Street’s consensus top-line and bottom-line forecasts, yet the stock fell 9.5%. If you’re like me, then you actually get excited when there’s an irrational decline in a stock.
Impressively, Affirm’s total Q3-FY2024 revenue grew 51% year-over-year to $576 million, surpassing the consensus estimate of $550 million. Furthermore, Affirm Holdings’ loss of $0.43 per share demonstrated a considerable improvement over the loss of $0.69 per share in the year-earlier quarter. Besides, this earnings result was certainly better than the consensus estimate of a loss of $0.70 per share.
What prompted the irrational share-price sell-off, then? Apparently, investors were apprehensive because Shopify (NYSE:SHOP) (TSE:SHOP), a key partner to Affirm Holdings, had just provided a lackluster current-quarter revenue outlook.
That sounds, to me at least, like a flimsy excuse to panic sell AFRM stock. It’s as if the market just completely disregarded Affirm’s results because they were distracted by another related company’s guidance.
Since then, Shopify stock has started to head back up, and the same can be said about Affirm Holdings stock. Yet, there’s an extra-special catalyst for Affirm, so let’s dive into the details of that now.
Affirm’s Deal with the Biggest Company of All
Apple stock is catching a bid because the iPhone maker just surpassed Microsoft (NASDAQ:MSFT) to become the most valuable company in the world. This undoubtedly is one of the main reasons AFRM stock is spiking, especially since Affirm Holdings now has a partnership with the almighty Apple.
I’d say that the timing is ideal for Affirm, and it’s a perfect partnership. Sure, Apple already has a popular payment processing app, Apple Pay. However, it seems that Apple wanted to enhance Apple Pay with Affirm’s BNPL capabilities.
According to a news report, Apple agreed to “integrate Affirm’s payment options into Apple Pay for U.S. customers, allowing them to purchase items using a pay-over-time feature.” Importantly, this will start prior to 2024’s December holiday shopping season.
Is this a win-win situation? Perhaps it’s a win for U.S. shoppers, who have a penchant for buying things they can’t really afford, especially during the December shopping season. That’s probably not great for cash-strapped consumers in the long run, but at least they’ll have flexible payment options through Affirm-enhanced Apple Pay.
At the very least, this is a huge win for Affirm, since the company’s BNPL services will be introduced to the legions of Apple Pay users. Just be aware that Affirm reportedly “does not foresee any significant financial impact from this collaboration” for Fiscal Year 2025. Still, it’s easy to envision an eventual boost in brand-name recognition and revenue generation for Affirm Holdings.
Is Affirm Stock a Buy, According to Analysts?
On TipRanks, AFRM comes in as a Hold based on three Buys, seven Holds, and three Sell ratings assigned by analysts in the past three months. The average Affirm Holdings stock price target is $35.70, implying 1.7% downside potential.
If you’re wondering which analyst you should follow if you want to buy and sell AFRM stock, the most profitable analyst covering the stock (on a one-year timeframe) is Dan Dolev of Mizuho Securities, with an average return of 27.7% per rating. Click on the image below to learn more.
Conclusion: Should You Consider Affirm Stock?
Earlier this year, Affirm Holdings stock got slammed because of the muted outlook of another company. In hindsight, this feels like an irrational overreaction because Affirm’s actual results were quite good.
In addition, the bullish argument for Affirm Holdings is undeniable now that the company has a crucial tie-in with Apple, the world’s most valuable company. Consequently, I imagine that AFRM stock will probably continue on the comeback trail, and I would consider purchasing Affirm Holdings shares today.
