Evercore ISI, via analyst Adam Frisch, recently brought out a recommendation that might seem like madness to some, but may instead have a method to it. The recommendation in question was for payment stock Affirm Holdings (AFRM), and investors took that advice to heart. Shares of Affirm gained nearly 3% in Wednesday afternoon’s trading as a result.
Frisch acknowledged, immediately, that the recommendation might seem outlandish given current conditions on the ground. Frisch noted: “Call us crazy for going into the eye of the storm with a consumer credit play, but AFRM just has better risk management than the peer group and is well-positioned to grow its user base in a fast-growing space with product expansion over time.”
Basically, while most any consumer-facing stock is likely to take a hit in the near term, Frisch notes that Affirm has the potential to weather the storm and come out ahead on the other side, ready to hit the ground running when conditions improve and customers start looking to spend money in a discretionary fashion once more. And, even in the current conditions, buy-now-pay-later options like Affirm deliver a potential way to get back otherwise lost customers.
Low-Water Mark
The remarks from Evercore come at an interesting time; just last week, Affirm had the second-worst week of trading it had ever seen, reports noted. The biggest reason was the obvious one: investors were concerned that consumers would reduce their discretionary spending in the face of economic worries, a prophecy that often turns out to be self-fulfilling.
In fact, the recent setbacks and tariff issues led Klarna to delay its initial public offering, reports noted. And while a case can comfortably be made that says buy-now-pay-later operations like Affirm can succeed here by offering skittish consumers a way to shop while softening the economic blow therein, the converse remains true. A certain amount of shoppers are likely to cut back their spending no matter what options are offered, and that hits Affirm.
Is Affirm a Buy or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on AFRM stock based on 13 Buys and six Holds assigned in the past three months, as indicated by the graphic below. After a 11.71% rally in its share price over the past year, the average AFRM price target of $69.79 per share implies 87.26% upside potential.
