Driven by rating upgrades from three Wall Street institutions, Affirm Holdings (AFRM.US) saw a significant surge in its stock price this week.
Wells Fargo (WFC.US) is the latest institution to express optimism about this "Buy Now, Pay Later" company. The bank's analysts, led by Andrew Bauch, upgraded Affirm's stock rating to "Overweight" on Friday and raised its target price from $40 to $52.
According to Dow Jones Market Data, Affirm's stock closed up more than 12% on Friday, at $47.08, with the stock price rising on three of the past four days, resulting in a total increase of 20%.
The Wells Fargo analyst team believes that several growth catalysts will drive the stock price upward in the coming year, including the payment partnership with Apple (AAPL.US) announced last month, as well as a decrease in interest rates, which will stimulate growth and reduce Affirm's financing costs.
The analysts pointed out that Affirm has demonstrated its "ability to gain market share" in the e-commerce checkout market over the years.
Affirm is expected to achieve operating profit under Generally Accepted Accounting Principles (GAAP) in the fourth quarter of the fiscal year 2025. Wells Fargo stated that this helps justify its high valuation: currently, Affirm is trading at 52 times the expected earnings per share for 2026. In comparison, financial technology peer Ally Financial is trading at 6 times, while credit card giant American Express is trading at 16 times.
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The analyst team said, "As GAAP profitability approaches, the valuation finally becomes more attractive."
Wells Fargo's rating upgrade for the company came after BTIG and Morgan Stanley (MS.US) upgraded their ratings earlier this week. BTIG raised Affirm's stock rating to "Buy"; Morgan Stanley increased its stock rating from "Underweight" to "Equal-weight" and mentioned the company's efforts targeting high-income consumers.
In the past few months, Wall Street's view of Affirm has become more optimistic. According to FactSet, 45% of analysts currently give Affirm's stock a "Buy" rating, up from only 28% in April of this year.