Bank of America says there is a buying opportunity for Affirm after the company’s buy now, pay later quarterly earnings report on Friday sent the stock down 5%. The bank reiterated its buy rating on Affirm, raising its 12-month price target for the stock to $88 from $82, implying a 37% upside from Friday’s closing price. Affirm is up 32% in the past month. Bank of America analyst Matthew O’Neill said in a report to clients on Monday that the company’s earnings “confirm our view that Affirm continues to operate as a best-in-class underwriter despite having the highest non-prime exposure among its peers.” “Disciplined underwriting, healthy consumer demand, and improving monetization trends led to better-than-expected gross merchandise, revenue net of transaction costs, and operating income results, highlighting the resilience of the model in a fluid macro environment,” the analyst said. On Friday, Affirm announced strong third-quarter results and guidance for the current fiscal year, reflecting tailwinds for the company’s business, including a “very constructive” financing backdrop despite broader macroeconomic fluctuations. The San Francisco-based company had third-quarter sales of $1.04 billion, beating analysts’ estimates of $995.3 million compiled by FactSet, and operating profit of $281 million, excluding certain items, compared with the Street consensus estimate of $248.9 million. Affirm expects sales of $4.175 billion to $4.25 billion for the fiscal year ending June 30, beating analysts’ consensus estimates of $4.14 billion. Bank of America said Affirm’s 5% drop on Friday after last month’s gains doesn’t mean the stock won’t continue rising. “While results were better than expected, the share price moved modestly. We view this as a temporary air pocket until the company updates its medium-term outlook at the May 12th investor forum,” O’Neill said. Bank of America’s judgment is in line with Wall Street consensus, with 24 of the 32 analysts covering Affirm rating the company a “buy” or “strong buy,” according to LSEG data. The stock has increased 38% over the past year, with almost all of that gain occurring in the last month.
