Key points:
- Affirm Holdings is looking promising on a risk/reward basis ahead of earnings next week
- DA Davidson and SMBC Nikko analyst's both find opportunity in the stocks recent sell-off
- Installment and BNPL services are massively increasing in popularity
Fintech has always proved a popular sector for innovation-focused investors. As finance continues its modern makeover; novel, tech-focused companies find themselves under the spotlight – offering inventive, efficient ways of managing payments. Affirm Holdings – an installment-orientated fintech that went public at the start of 2021, has recently been the subject of analyst speculation following a sharp sell-off towards the end of last year.Â
Installment or buy-now-pay-later services are becoming increasingly popular with consumers, with a U.S report showing that these services more than doubled over the holiday season. Sure, this is a uniquely positive time for retail and financial services, but as payment portals become more convenience-centered; companies like Affirm will start to bear the fruits of a changing landscape.Â
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Late last week, DA Davidson issued an upgrade for Affirm, from a Neutral to a Buy; stating that the recent ‘brutal’ sell-off offers promising risk-reward and that the companies upcoming earnings are likely to spur some growth back into the heavily sold stock, bearing in mind the paramount growth in this sector and growing consumer awareness of these new types of payment options.Â
The company is set to release earnings next week. DA Davidson analyst Christopher Brendler also sees promise in the company’s line-by-line earnings guidance, which ‘sets the bar lower’ and hence creates room for significant upside potential. Affirm has strong partnerships with Amazon and Shopify, two leading e-commerce giants that will support Affirm’s revenue model while optimizing maximum exposure for potential customers.
One issue for Affirm is the looming hawkish cloud that threatens hyper-growth tech stocks. SMBC Nikko analyst Andrew Bauch pointed out that the landscape has become ‘increasingly difficult’ for fintech investors. However, Bauch still outlines Affirm’s current position as a ‘compelling buying opportunity’ based on the current sell-off and improvement in company fundamentals.Â
It’s a difficult time for tech investors; bulls should continue looking for strong outlooks in earnings releases as indicators of the wider ecosystem. Affirm’s current position looks appealing on a risk/reward basis ahead of potentially strong earnings next week.