BNPL Stock Affirm Under Pressure Amid Analyst Concerns

Shares in buy-now-pay-later (BNPL) services provider Affirm Holdings (AFRM:US) fell more than 10.5% on Thursday after analysts at research firm “Piper Sandler” lowered their recommendation rating.

In a note sent to the firm’s clients, the analyst cut the rating to Underweight from Neutral. The new rating signals that Affirm shares are likely to underperform the market over the next 12 months. The price target of $11 per share, set by Piper Sandler analysts, signals a downside risk of over 20% relative to Thursday’s closing price.

At the core of Piper Sandler’s concerns is the margin pressure.

"We expect persistently higher rates to pressure operating margins as AFRM needs to hold more loans on balance sheet," the analysts said in a note. 

"In addition, we expect tighter underwriting standards, increased pricing, and the re-introduction of student debt payments to cause an incremental slowdown in revenue growth over the next year."

Street consensus sees Affirm growing its revenues by 24% year-over-year, which the analysts believe will be difficult to achieve. 

Despite Thursday’s selloff, Affirm shares are still trading around 50% higher year-to-date. In 13 months from November 2021 to December 2022, Affirm shares fell as much as 95%. The stock is indicated to open further lower on Friday.

Congressman Daniel Goldman disclosed in May that he was a buyer of the stock in early April. His colleagues Tom Suozzi and Josh Gottheimer were sellers of AFRM shares back in 2022.