By Jack Denton
Affirm stock rallied ahead of the fintech company's quarterly results late Thursday but were falling sharply Friday. Analysts said the reason behind the decline in the shares likely was overblown and it could be a buying opportunity.
Shares in Affirm surged 10.3% on Thursday but were down 8.5% in premarket trading Friday after the buy-now-pay-later company's fiscal second-quarter results. Affirm reported a loss of 54 cents a share on revenue of $591 million, beating expectations among analysts surveyed by FactSet for a loss of 72 cents a share on revenue of $521 million.
In focus was the company's gross merchandise value, or GMV, which marks the total value of transactions across the platform. GMV for the quarter came in at $7.5 billion, blowing past analysts' expectations of $6.9 billion. Affirm also raised its outlook for fiscal year 2024 GMV to $25.25 billion, a $1 billion bump from its prior forecast.
All that might have helped Affirm stock surge higher -- the shares already have risen more than 250% in the past year -- but the opposite happened. It looks like "a knee-jerk reaction," wrote Mizuho analyst Dan Dolev in a note because the GMV guidance for the fiscal year was raised by $1 billion after such a massive beat in the prior quarter, implying that growth will decelerate in the second half of the fiscal year.
"Since this is likely just conservatism, we expect the stock to recover, " Dolev said, reiterating his Buy rating on the stock and holding the price target at $65. The shares closed above $49 on Thursday. "We view this as a buying opportunity," Dolev said.
Other analysts shared that sentiment, believing that Affirm's history of outperforming Wall Street's expectations means that the GMV guidance can be beaten.
"We aren't reading much into the soft outlook, as Management has a track record of beating. We are raising estimates (slightly above guidance) and our Dec '24 price target to $41 (from $35). We remain Neutral (on valuation), but would be more constructive on a pullback," wrote J.P. Morgan analyst Reginald L. Smith in a note.
Indeed, management did describe its GMV guidance as a floor, which is helping analysts remain upbeat about growth through June.
"We would be surprised to see this magnitude of slowdown, if any at all, considering apparent broadening momentum and consumer engagement," wrote Truist analyst Andrew W. Jeffrey in a note, reiterating his Buy rating and $60 price target. "We see [buy-now-pay-later] in its infancy," he added. "We see Affirm as a singular co, and believe investors will pay a premium for its transformational potential."
Maybe the stock market will come around to that view, too.
Write to Jack Denton at jack.denton@barrons.com
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(END) Dow Jones Newswires
February 09, 2024 08:22 ET (13:22 GMT)
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