Representing a surprise winner on Friday, shares of consumer-lending fintech specialist Affirm (NASDAQ:AFRM) — which provides a buy now, pay later (BNPL) platform — are jumping around 30% today. Undergirding sentiment this afternoon is a solid earnings print and optimistic guidance from the company. Still, analysts remain skeptical about AFRM stock.
According to a CNBC report, Affirm posted a loss per share of 69 cents for its fiscal fourth quarter. That beat the Wall Street consensus, which sat at a loss of 85 cents, per Refinitiv data. On the top line, the company also rang up $446 million in sales, handily beating analysts’ expectation for $406 million.
However, what’s really bolstering sentiment for AFRM stock is management’s strong guidance for fiscal Q1. The company projected a revenue range of between $430 million to $455 million for the period. In contrast, the Street anticipates Q1 sales of $430 million.
Notably, Affirm reported gross merchandise volume (GMV) of $5.5 billion during the quarter as well. That marks a 25% increase year-over-year (YOY). Analysts had targeted GMV to hit $5.3 billion.
Overall, AFRM stock appears to be climbing a wall of worry. Still, many market observers remain unconvinced.
AFRM Stock Rises Despite Legitimate Skepticism
As The New York Times recently noted, retailers have reported signs that U.S. consumers are feeling stressed. A pensive cloud has taken over, argues journalist Jordyn Holman, “as Americans’ savings erode, inflation continues to bite and other factors tighten their wallets — namely, the resumption of student loan payments in October.” However, the rise of AFRM stock appears to dismiss such concerns.
“Despite significant changes in interest rates and consumer demand, we still delivered good credit results, unit economics, and GMV growth,” stated Affirm Chief Financial Officer Michael Linford. “We also demonstrated that the business can continue to expand profitably even in a high interest rate environment.”
As for the resumption of student loan payments, management acknowledged that it will be “a modest headwind” to its fiscal 2024 GMV.
Still, while many analysts are cheering Affirm’s robust print, others are questioning the optimistic tone. As many news outlets reported, credit card balances jumped by $45 billion between calendar Q1 and Q2 of this year. Overall, the total plastic debt has exceeded the $1 trillion level.
“There appears to be potential downside to numbers in the form of losses and higher provision should the impact of payment resumptions on consumer credit be slightly more than ‘modest’,” writes BTIG analyst Lance Jessurun.
Why It Matters
At the time of this writing, TipRanks points out that AFRM stock carries an analyst consensus view of hold. This assessment breaks down as three buys, seven holds and four sell ratings. Overall, the average price target for AFRM sits at $15.71 per share, implying around 13% downside risk.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
