Affirm is poised to add value to its battered shares due to a combination of catalysts, including several potential upward revisions to its growth estimates, according to Morgan Stanley. The investment bank, which has an overweight rating on Affirm, has made the payments stock its top pick. It has a $76 price target on shares, implying 26% upside from Thursday’s close. “AFRM is our Top Pick on upward estimate revision potential, overdone private credit fears, and a strong catalyst path,” Morgan Stanley analyst James Faucette said Friday in a note to clients. “With [asset-backed securities (ABS)] spreads stable, funding still open, and [the firm’s] Investor Forum likely to raise [gross merchandise value (GMV)], margin, & EPS targets… our [fiscal year 2028] GAAP EPS looks too low.” The analyst noted that Affirm is poised to benefit from several catalysts in the near term, including its Investor Day in May. And while investors have raised concerns about Affirm and other payment stocks’ links to private credit following signs of cracks in the asset class and the industry that governs it, those fears appear to be “overblown,” the analyst said. To that end, investors’ handwringing over the firm’s ability to sustain more than 30% growth merchandise value growth over the near-to-medium term while driving adjusted operating income expansion at or above the 30% level also seems excessive, according to Morgan Stanley. “AFRM’s public ABS spreads have shown no signs of deterioration, which we view as an important leading indicator for forward-flow demand, and peers with choppier historical credit performance and less consistent capital markets execution have raised forward flow capital intra-quarter,” Faucette said in his note. The company is likely to raise several estimates linked to its financial outlook in the near and medium term — a scenario that would also drive up shares, according to Morgan Stanley. “The catalyst path is unusually strong: we expect AFRM to refine its medium-term framework across GMV, [revenue less transaction costs (RLTC)] margin, and [adjusted operating income (AOI)] margin,” Faucette wrote. “Against that backdrop, the stock’s valuation remains compelling.” Morgan Stanley’s call falls in line with consensus on Wall Street. Of the 31 analysts covering Affirm, 23 have a buy or strong buy on the stock. Shares have plunged 19% since the beginning of the year. However, Affirm has recently begun to reclaim some of that lost ground, gaining nearly 27% over the past month.
