Affirm Faces Competition. J.P. Morgan Starts Coverage With Neutral Rating.

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Affirm is set to report its quarterly earnings after the closing bell Thursday

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Courtesy Affirm

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“Buy now pay later” company Affirm is poised to continue its growth, fueled by an increase in consumer demand for alternative financing options and its partnerships with Shopify and Amazon,

But the company also faces an increase in competitors, according to JP Morgan.

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The firm initiated coverage of the company Wednesday with a $30 December 2022 price target and a Neutral rating.

“ Affirm (AFRM) is a commerce disruptor, driving the convergence of retail, technology and ecommerce through its consumer marketplace app and innovative financing products,” JP Morgan analysts wrote in a research note.

The stock was down 11% Wednesday afternoon to $16.14 and has tumbled more than 80% year to date. The tech-heavy NASDAQ Composite Index has fallen 26%.

“Buy now pay later,” also known as BNPL, offers consumers additional financing options when in the check out process. The option has become increasingly popular among consumers whose wallets have been pressured by inflation.

Affirm (ticker: AFRM) is just one of the companies that offers these alternative financing options, and JP Morgan analysts say that competition in the space is heating up.

“AFRM was a late entrant to the split pay space and trails industry leaders, Klarna, Afterpay, and PayPal in active users, volume, and brand awareness today and lacks a direct relationship with its Shop Pay Installments users—its fastest growing and most active user segment—which we think hinders the ability to cross-sell additional loans and products,” the analysts said.

Affirm shares have lost more than $2 billion in market cap this year largely attributable to waning consumer confidence and investor avoidance to high-growth, yet-to-be profitable companies, the analysts said.

“While the company has strong technology and acceptance agreements with two of the largest online platforms, we fear the bloom is off the rose for AFRM and other sub-scale BNPL players. Several BNPL companies have been acquired this year (Block/Afterpay and Zip/ Sezzle ) and that trend could continue, as competition intensifies,” they said.

Affirm is set to report its quarterly earnings after the closing bell Thursday. Analysts surveyed by FactSet are expecting to see a loss of 46 cents per share and a revenue of $343 million.

Write to Logan Moore at [email protected]


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