Shares of the financial technology company Affirm Holdings (NASDAQ:AFRM) closed 14.93% lower on October 25. Moreover, AFRM stock is down over 1% in today’s pre-market session. While there was no company-specific reason, Mizuho Securities analyst Dan Dolev noted that the France-based payment processor Worldline (FR:WLN) warned of a “macroeconomic deterioration” in core markets, particularly in Germany, which is hurting the entire fintech sector in the U.S.
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AFRM Shareholders Shouldn’t Worry Much
Worldline said that the macroeconomic weakness in key geographies and the termination of some specific merchants’ relationships are impacting its growth and profitability. However, Dolev sees the “worries as overblown” for companies like Affirm, which have “little to no exposure to Germany & Europe,” implying the drop in AFRM stock is unwarranted.
Further, investors should note that Affirm is expanding its reach by bringing more merchants to its platform and growing its partnerships with the existing ones. This will drive Affirm’s GMV (Gross Merchandise Volume) and top line. Moreover, the company is focusing on delivering profitable growth through its margin improvement initiatives, which is positive. Additionally, AFRM’s credit metrics remain strong, with consumer delinquencies showing improvement.
Speaking at the Fireside Chat Call on September 28, AFRM’s CFO Michael Linford said, “Consumer delinquencies are right in line with where we thought they would be at this point in line with their expectations.” He added that Affirm is also benefiting from access to the debt capital markets. Overall, a less volatile environment and improving credit performance are positives for Affirm. With this backdrop, let’s look at what the analysts recommend for its share price.
What is the Stock Prediction for Affirm?
Affirm is focusing on generating sustainable earnings and continues to deliver improved financial performances. That said, higher funding costs, an increase in provision for credit losses, and macro pressure over consumers’ discretionary spending pose challenges, which could limit the upside potential in AFRM stock in the near term.
With three Buy, seven Hold, and four Sell recommendations, Affirm stock has a Hold consensus rating. Further, Affirm stock is up about 72% year-to-date. Thus, the average AFRM stock price target of $17.11 implies a limited upside potential of 2.82%.
