A while back, things were not looking so good for payments company Affirm (AFRM) as it lost one of its biggest clients. But it turned things around somewhat, by landing a new deal with several smaller clients. Unfortunately, investors did not see this as a net win, and shares slid over 3% in Tuesday afternoon’s trading.
The good news for Affirm was that, now, it will work with JPMorgan Chase (JPM) merchants. Not immediately, of course, but over the next few weeks, businesses that use JPMorgan for their checkout systems will be able to offer Affirm loans as part of the process. Thus, shoppers will be able to spread out their payments in time frames from 30 days all the way up to 60 months.
It comes at an excellent time for Affirm, as there is rising demand for “diverse payment options, flexibility, and seamless transactions….” In fact, according to global head of merchant services at JPMorgan Payments, Michael Lozanoff, that demand is at an “…all-time high” right now.
Buried Under Klarna
However, there is a downside to this. While indeed, that demand is at an all-time high, Affirm finds itself increasingly getting its lunch eaten by Klarna, its immediate rival in the field who is looking for an initial public offering (IPO) in the days ahead. Klarna actually announced the same deal with JPMorgan just last month, reports noted, meaning that Affirm is merely playing catch-up.
Worse yet, this move also comes as Affirm lost a major customer in Walmart (WMT). And lost it, no less, to Klarna, who stepped in in Affirm’s place. The move cost Affirm big, as reports noted, just for the second half of 2024, purchases made through Walmart represented around 5% of gross merchandise volume. That left Affirm scrambling for new partnerships, and gave Klarna a huge leg up.
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 23.87% loss in its share price over the past year, the average AFRM price target of $71.19 per share implies 39.32% upside potential.
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