Financial services company Affirm (AFRM) had a rough day of trading on Tuesday last week. However, it turned that around, at least partially with its premarket performance overnight, and that momentum carried on for a few days. The company rolled out several new features that should prove attractive to current customers. Its embrace of the reasons behind these new features, though, makes me bullish on Affirm overall.
Affirm stock has been a disaster for most of this year, until just recently. It was tracking upward through much of early 2021, and hit a closing high for the year at $139.99 back on February 10. The next day, Affirm stock started a plunge that would last all the way until March 7. That was when it popped back up slightly, plateaued, dropped, plateaued, gained a bit, and then dropped again, where it spent most of May trying to clear $60 per share. The stock stayed in the doldrums until August 27, when a huge spike hit and started the company upward to the point where it’s rechallenging February highs. (See Affirm stock charts on TipRanks)
The new features the company added are drawing a lot of attention. First, the company is adding on a debit card option for its account holders. That’s a small step but a useful one. Debit cards have proven their value over time, to the point where they’re almost table stakes today; anyone offering savings or checking products needs one to keep interest going.
The second new feature may be the biggest surprise. Those who hold savings accounts with the company can now buy and sell cryptocurrency direct from those accounts. This catches Affirm up to companies like PayPal (PYPL), who have been expanding crypto purchase options direct from accounts. The feature is described as “new and coming soon,” so it’s not quite clear yet just which of the over 6,500 cryptocurrencies can be bought and sold on Affirm.
Wall Street’s Take
Wall Street consensus analysis calls Affirm a “Moderate Buy”. Affirm has held that ranking since February 2021, when that first plunge hit. Of the 11 Wall Street analysts with 12-month price targets on Affirm in the last three months, six of them consider Affirm a “Buy.” Four, meanwhile, call it a “Hold” and the remaining one is a “Sell.”
The average Affirm price target occupies a surprisingly broad range. The current average price target is $121.40 per share, with a high of $150 and a low of $65. With Affirm’s last price of $117.85, that represents an upside potential of around 3.01%.
Comeback Tour, or Too Little Too Late?
The news is good for Affirm, and Affirm needed some good news after the 2021 it’s seen so far. Expanding its product line is a great way to help keep current users in the fold. It helps bring in new ones as well. The sheer number of competitors requires that Affirm take measures to keep its customer base.
Offering access to cryptocurrency purchases is a great step forward, though hopefully, it won’t end up like PayPal’s. PayPal only, at last report, allows customers to buy one of four cryptos: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. Great, but with 6,496 or so other coins going completely ignored, the impact of that only goes so far. If Affirm opens up the floodgates and allows access to the broader stock, it may find itself doing brisk business.
A quote from Affirm’s CEO Max Levchin, however, suggests that buying in on the latest sub-penny cryptos may be out of reach. “We are doing it in a way that feels natural to us. We will make it really simple, it’s safe, we won’t let you do crazy things.” “Crazy things,” sadly, will probably include “buying any cryptocurrency that isn’t being bought already by institutional investors.”
Worse, this comes at a time when major financial figures are already targeting some of Affirm’s current business. Mastercard (MA) recently announced that it was getting in on the “Buy Now, Pay Later” (BNPL) movement. That allows just about any retailer to offer easy financing on their products. Mastercard’s entry into that space was what generated most of the hit Affirm took in trading yesterday.
Concluding Views
The best news about all this is that Affirm understands the position it’s in. At least, it sure seems to. At a time when major financial operations are trying to eat its lunch in BNPL, it’s branching out to not only try to eat the majors’ lunch with debit cards, but also get a whole new lunch with crypto. That’s a positive development by any stretch.
The stock is trading very close to its consensus stock price target. However, the fact that Affirm has such a clear grasp of its own future makes it attractive. It knows the conditions of the market in which it labors, and it can respond to these accordingly. That makes it more likely that the stock will make a play for much higher levels. Getting in on Affirm now may be a good idea. It certainly proved to be a good idea three months ago.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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