Affirm Stock Price Falls 10% – Time to Buy AFRM Stock?

Affirm stock (AFRM) fell 10.5% yesterday but was trading marginally high in premarket price action today. The stock is now down over 60% from its 52-week highs of $146.90. What’s the forecast for AFRM stock and should you buy the dip?

Affirm is a fintech company that offers buy now pay later service. It went public earlier this year through a traditional IPO. The company had previously scheduled the IPO for 2020. However, the sharp rise in DoorDash and Airbnb IPO prompted it to do a rethink on the valuations.

Roblox also delayed its listing to 2021 and has listed through the direct listing mechanism. Coinbase also chose a direct listing to go public. Meanwhile, Affirm priced its IPO at $49 which was above the range. The stock soared on listing and continued to move higher.

Affirm stock has fallen

Meanwhile, Affirm stock is down sharply from the peaks. Several factors are at play in the sell-off. Firstly, there has been a sell-off in growth stocks amid the rise in bond yields. While growth stocks were the favorites only about six months back, they have since fallen out with investors. A lot of investors have pivoted their portfolios towards value and cyclical stocks which is also reflecting in their price action. Value stocks have bounced back this year and are outperforming growth stocks after over a decade of underperformance.

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Apple is reportedly getting into buy now pay later

Also, there has been a sell-off in fintech stocks which was among the hottest investment themes of 2020. Meanwhile, while Affirm stock was trying to stabilize, reports of Apple entering the buy now pay later industry triggered a sell-off in the stock yesterday. Currently, Apple has a credit card in collaboration with Goldman Sachs. Apple has in the past also indicated its intent to expand its financial offerings.

“One of the things we are doing is trying to make it simpler and simpler for people to get on these sort of monthly financing kind of things,” Apple CEO Tim Cook had said in 2019 while introducing a program to buy iPhones on monthly installments.

Affirm stock technical analysis

Affirm stock is looking very bearish on the charts. It has fallen below the 10-day, 30-day, 50-day, and 100-day SMA (simple moving average). The 12,26 MACD (moving average convergence divergence) also gives a sell signal. The 14-day RSI is 38.75 which is getting near the oversold territory. RSI values below 30 signal oversold positions while values above 70 signal overbought positions.

Affirm stock forecast

Meanwhile, Wall Street analysts are bullish on Affirm stock and its median target price of $76.50 implies an upside of 31.4% over current prices. Its lowest target price is $55 which is a discount of over 5.5% while the highest target price of $93 is a premium of 59.7% over current prices.

Of the 12 analysts polled by CNN Business, 17 rate AFRM stock as a buy while four rates it as a hold. Only one analyst has a sell or equivalent rating on the stock. In May, DA Davidson initiated coverage on Affirm stock with a buy rating and an $80 target price. Mizuho also initiated coverage on AFRM with a buy rating and a $90 target price last month. However, Stephens initiated the stock with an underweight rating and a $55 target price.

Recent developments

In May, Affirm released its fiscal third-quarter 2021 earnings. The company’s revenues increased 67% year-over-year to $230.7 million in the quarter. The company posted an adjusted operating profit of $4.9 million in the quarter as compared to an operating loss of $70.7 million in the corresponding quarter in 2020.

Expressing optimism over the results Max Levchin said “We are seeing strong momentum in our business as we advance our growth strategy. In recent weeks, we have activated ShopPay Installments powered by Affirm for more than 10,000 Shopify merchants. We expect this number to significantly increase as we move towards general availability in June.”

He added, “Looking ahead, we believe the strengthening health of the consumer, Affirm’s deep and diverse merchant partnerships, and our unrivaled technology will position us to capture a substantial share of our expanding market opportunities.”

Should you buy AFRM stock?

AFRM stock now trades at an NTM (next-12 months) EV-to-EBITDA multiple of 14.9x. The multiple has averaged 22.03x since the company went public. The current multiples are very near the all-time low of 12.3 for Affirm as a public company.

Currently, Affirm stock is out of favor with markets, and Apple’s rumored foray into buy now pay later market is only adding to the negative sentiments. However, the recent fall in AFRM stock looks like an opportunity to buy this fintech name at attractive valuations.

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