Why Now is the Time to Consider Buying Affirm Stock

Investing in stocks can often feel like riding a roller coaster, with sharp rises and sudden drops. One stock that has seen its fair share of ups and downs in 2026 is Affirm Holdings (AFRM), a leader in the buy now, pay later (BNPL) sector. Despite an impressive rebound, with a staggering 61% increase from its year-to-date lows, the stock remains down about 8.6% overall this year. Recent financial results have sparked interest among analysts and investors alike, leading to renewed discussions about whether it’s time to buy the dip.

The volatility of Affirm’s stock price, particularly following a strong fiscal Q4 earnings report, raises important questions for potential investors. After reaching notable highs last month, the stock has lost nearly a quarter of its market capitalization. This fluctuation prompts a closer examination of the company’s performance metrics and future growth potential to determine if now is indeed the right moment to invest.

Affirm’s Strong Q4 Earnings Performance

In June, Affirm reported impressive fiscal Q4 earnings that exceeded expectations, showcasing several key performance indicators that point to its sustained growth. The company’s gross merchandise value (GMV), which reflects the total dollar value of transactions facilitated through its platform, surged by **36% year-over-year (YoY)**. This marks the **11th consecutive quarter** where Affirm has achieved over 30% growth in this metric.

Key Financial Highlights

• Active Consumers: Affirm saw a **21% increase** in active consumers, reaching **27.8 million**.
• Active Merchants: The number of active merchants on its platform grew by **50%**.
• Transactions per Active Customer: Transactions per active customer rose to **7**, a **20% increase** from the previous year.

These figures underscore not only Affirm's ability to attract new users but also its effectiveness in encouraging repeat business among its existing customers. The company’s GMV crossed **$50 billion** last fiscal year, and projections suggest it could reach at least **$64 billion** this year, reinforcing its position as a significant player in the BNPL space.

Analyst Sentiment: A Bullish Outlook

The positive sentiment surrounding Affirm is further bolstered by the actions of financial analysts. Following the earnings report, several brokerages revised their target prices upward. Notably, Piper Sandler raised its target from **$103 to $115**, and TD Cowen set a Street-high target of **$124**, suggesting a potential upside of **82%** from current stock levels. Loop Capital has also initiated coverage on Affirm with a 'Buy' rating and a target price of **$105**.

This bullish outlook is supported by a consensus among analysts, where **26 out of 37** have rated Affirm as a “Strong Buy.” The remaining analysts provide a mix of “Hold” and “Moderate Buy” ratings, with the mean target price indicating an average potential gain of **46%** from current values.

Reasons to Consider Buying Affirm Stock

Investors looking at Affirm should consider several foundational aspects that make it an attractive investment proposition:

Robust Growth and Profitability

Affirm has demonstrated a strong operational execution and has recently achieved **GAAP profitability**. Its prudent underwriting practices have helped maintain low delinquency rates, minimizing risks associated with loan defaults. Furthermore, Affirm has ample room for growth, as it currently operates in less than **one-third** of the top 250 e-commerce websites.

Expansion into New Markets

The company is not just focusing on its existing markets but is also expanding internationally. Affirm has made strides by launching its services in the U.K. and introducing ShopPay Installments with Shopify in Australia. This global expansion is crucial for sustaining revenue growth in the long term.

Valuation Considerations

Currently, Affirm trades at a forward price-to-earnings (P/E) multiple of **38.5x**, which, while appearing high, is reasonable for a company projected to grow revenues by nearly **29%** in the coming year. Analysts estimate that Affirm's earnings per share will increase by **53.5%** to **$2.87** by fiscal year 2028. These figures suggest that while the stock is volatile, it remains fundamentally sound.

Risks to Keep in Mind

Despite the positive outlook, potential investors should remain aware of specific risks associated with investing in Affirm:

Interest Rate Fluctuations

One of the primary risks is the potential for interest rate hikes in the U.S. These increases could lead to higher borrowing costs for Affirm, impacting its profitability and growth prospects. Investors should monitor Federal Reserve policies closely, as changes can significantly affect the financial landscape.

Consumer Financial Health

While Affirm has maintained that its customer base remains financially stable despite broader economic challenges, any deterioration in consumer financial health poses a risk. A significant economic downturn or rising unemployment could lead to increased defaults on loans, affecting the company’s bottom line.

Key Takeaways

• Affirm has demonstrated strong growth metrics, with a **36% YoY increase** in GMV.
• Analysts are generally bullish, with **26 out of 37** rating Affirm as a “Strong Buy.”
• The company is expanding internationally, enhancing its growth potential.
• Investors should remain cautious of interest rate changes and overall consumer financial health.

Frequently Asked Questions

What is Affirm's business model?

Affirm operates in the buy now, pay later (BNPL) sector, allowing consumers to make purchases and pay for them over time through manageable installment payments. This model appeals to consumers looking for flexible payment options, especially for larger purchases.

How has Affirm performed financially in recent years?

Affirm has shown consistent revenue growth, achieving GAAP profitability for the first time in its history. The company has reported significant increases in GMV and active consumer engagement, illustrating its effectiveness in the competitive fintech landscape.

What should investors consider before buying Affirm stock?

Investors should assess the stock’s current valuation, the company’s growth potential, and any external risks, such as economic conditions and interest rate fluctuations. Conducting thorough research and possibly consulting with a financial advisor can help in making informed investment decisions.