Affirm’s growth has been strong, and its results relative to competition show its potential hasn’t been realized, according to Loop Capital. The firm initiated coverage of the buy-now-pay-later company with a buy rating and a $105 price target. That indicates a 45% gain from Tuesday’s close. Analyst Reginald Smith wrote that the company is a high-quality growth story in the consumer fintech space. “While Affirm already powers $50+ billion in annual [gross merchandise revenue], connecting 27+ million consumers with 500,000+ merchants, consumers transact less than 7 times a year on average,” Smith said. “As distribution expands through partners such as Stripe and Adyen and the Affirm Card drives near-ubiquitous acceptance, we see a clear path to sustained 25%+ GMV and revenue growth.” AFRM YTD mountain Affirm year-to-date. Key for the company is that less than seven times a year transaction count. Compare that to Visa, where Smith said the average credit card within the company produces 70 transactions a year. That shows a clear path for growth for Affirm, he said. Smith added that Affirm’s Visa-branded card is a $2.4 trillion opportunity, measured by annual purchase volume. The card already has 4 million users, and Smith estimates it could grow five times that number over time. But what makes Affirm so appealing is when you look at its key competitor in the buy-now-pay-later space, Klarna , Smith said. “Affirm is one-third the size of Klarna based on GMV but generates 40% more transaction profit dollars and 9-times more adjusted operating profit,” he wrote in the note, “due to a significantly higher mix of installment loan purchase volume and significantly lower marketing spend.” Affirm shares are down 3% this year, but they have surged 42% over the past six months. Analysts are mostly bullish on the stock. Of the 36 who cover Affirm, 28 rate it a buy or strong buy, according to LSEG.
