Analysts’ Upbeat Reaction to Amazon-Affirm BNPL Agreement

Last Friday, Affirm Holdings Inc. (NASDAQ: AFRM) announced that its buy now, pay later (BNPL) payment solution would be available soon for some Inc. (NASDAQ: AMZN) customers. After some months of testing with selected customers, Amazon plans to make Affirm’s plan available more widely to Amazon customers.

Predictably, Affirm’s stock price soared Monday morning, rising nearly 50% in premarket trading. That pulled back somewhat after the regular trading began, but the gain remained around 42% at $96.20. The stock’s 52-week range is $46.50 to $146.90.

Also predictably, analysts are quite positive in their responses to the announcement. Here are six early assessments from various brokerage houses. One raised its rating on the stock, and most others raised their price targets.

Bank of America called the announcement “an unambiguous positive” for Affirm while saying that it is “premature to quantify the potential GMV [gross merchandise value]/revenue benefit” for the company. Referring to Affirm’s recent deals with Shopify and Apple Canada, the analysts said the Amazon agreement “underscores Affirm’s technological leadership and strong reputation in the BNPL market.”

Barclays raised its rating on the stock from Buy to Overweight and raised its price target from $73 to $120. The analysts noted that the deal “dramatically expands” Affirm’s total available market because Amazon gets about 40% of all U.S. e-commerce business. Barclays, too, commented on how the deal validates both Affirm and the BNPL business in general.

Credit Suisse raised its price target on the stock from $70 to $85 and did not change its Neutral rating. Including an earlier agreement with Walmart with the more recent Shopify and Apple Canada deals, the Amazon agreement will “bolster Affirm’s network effects, supportive of Affirm’s relative competitive positioning for future merchant and user additions ahead.” The analysts also said that the deal “could add an incremental ~35-40% to Affirm’s contribution profit” compared to the bank’s current estimates.

JPMorgan noted that the current consensus estimate for Affirm’s 2022 GMV is $14.1 billion. The firm currently estimates that Amazon’s GMV for 2022 will be approximately $500 billion, about 35-times Affirm’s current scale. The analysts added that the deal with Amazon “makes [Affirm] increasingly look like a credible takeout target with potential suitors being [Shopify], [Amazon], [PayPal, [and] Stripe.” One more comment from JPMorgan worth noting: “We saw [short] covering in [Affirm] post the [Square-Afterpay] deal but [the] stock still has a 10%+ short base which will be painful today.”

Mizuho has a Buy rating on Affirm stock and raised its price target on Monday from $76 to $110. According to a survey the firm did following Affirm’s Friday announcement, Mizuho reports that “nearly 50% of Amazon shoppers are likely to use [Affirm’s] buy-now-pay-later (BNPL) offering. We estimate that this could drive 20-30% potential upside to [Affirm’s] medium-term GMV.

Morgan Stanley has an Overweight rating on the stock and Monday morning boosted its price target from $73 to $120. The analysts commented: “We think that moving on to [Amazon] will meaningfully accelerate the pace of [Affirm’s] customer growth and usage.”

Truist raised its price target from $82 to $120 and left its Buy rating on Affirm’s stock. The analysts commented: “It is our opinion that the [company’s] superior data-driven outcomes maximize value for all ecosystem participants. Whereas BNPL has relatively low entry barriers, in our view, and can become quickly commoditized, recent enterprise wins at Shopify (exclusive) and now Amazon (exclusivity unknown) highlight Affirm’s competitive advantage.

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