Affirm Holdings is poised to broaden its total addressable market by utilizing its buy-now-pay-later debit card alongside a fresh capital injection of $4 billion from Sixth Street, as noted by Deutsche Bank in a report distributed on Monday. The brokerage adjusted its price target for Affirm's stock to $75, reaffirming a hold rating.
This new target signifies a significant rise from the previous target set at $45, per FactSet data. Analyst Bryan Keane shared that this more optimistic outlook follows a detailed discussion on Friday with Affirm's Chief Financial Officer, Rob O'Hare. The dialogue primarily revolved around the promising potential of the Affirm Card.
According to Keane, the card is set to continue its rollout among existing Affirm users, which is expected to significantly augment the company's total addressable market. Currently, approximately 7% of Affirm's user base employs the Affirm Card, which constitutes around 8% of the total gross merchandise volume for the September quarter, O'Hare informed Keane, as per a FactSet transcript. "It's a product that deepens the relationship with existing consumers," O'Hare stated.
"Most of our users on the Affirm Card side begin with a type of point-of-sale loan and subsequently uncover some of our direct-to-consumer offerings, be it our marketplace or Affirm Card. They tend to utilize it for their second, third, or even fourth transactions." The discussion also delved into broader economic factors, credit trends, profitability, the competitive landscape within the buy-now-pay-later (BNPL) sector, and Affirm's strategic roadmap, according to Deutsche Bank. Affirm opted not to provide a volume update regarding Black Friday and Cyber Monday expenditures but did report seeing robust activity within travel and consumer electronics sectors, which O'Hare noted were witnessing growth rates of approximately 40% to 50%.
These sectors are considered vital indicators of consumer discretionary spending, Keane remarked. O'Hare asserted that Affirm is experiencing growth at a pace significantly quicker than the general e-commerce sector. On Friday, Affirm disclosed its partnership with investment firm Sixth Street, allowing for up to $4 billion over the next three years — this marks the largest capital commitment in the company's history.
Deutsche Bank emphasized that this partnership enhances Affirm's capacity to fuel its growth trajectory. The agreement entails additional off-balance sheet funding that empowers Affirm to extend over $20 billion in loans. In its November report, Affirm revealed a fiscal first-quarter net loss of $0.31 per share, which is an improvement from a $0.57 loss reported the year prior, alongside a notable 41% revenue increase to $698.5 million. Price: 71.65, Change: +0.95, Percent Change: +1.34.