Oppenheimer starts fintech stock at Buy on strength in BNPL market

Oppenheimer has initiated coverage on Affirm Holdings (AFRM) with an Outperform rating and an $80 price target, highlighting the company's strong position in the rapidly expanding Buy Now, Pay Later (BNPL) market. The firm projects Affirm will achieve mid-20% compound annual growth in gross merchandise volume and high-20% growth in adjusted operating income over the next two years, driven by its differentiated underwriting and robust funding strategy, which enabled 42% GMV growth from 2022-2024. Despite the recent loss of the Walmart partnership, Oppenheimer anticipates Affirm will exceed conservative FY26 guidance, projecting 27% GMV growth and $1 billion in adjusted operating income, considering its current sub-1x estimated next-twelve-month EV/EBITDA to EBITDA growth valuation attractive and its lending model resilient to potential economic downturns.

Analysis

Oppenheimer has initiated coverage on Affirm Holdings (AFRM) with an Outperform rating and an $80 price target, signaling approximately 15% upside potential. The bullish thesis is underpinned by Affirm's significant outperformance in the Buy Now, Pay Later (BNPL) sector, where its gross merchandise volume (GMV) expanded at a 42% pace from 2022 to 2024, far exceeding the market's 21% CAGR and rival Klarna's 13% growth, leading to a nearly 400 basis point gain in global market share. Despite the recent loss of the Walmart partnership, which accounted for about 5% of GMV, Oppenheimer projects Affirm will surpass conservative full-year 2026 guidance, forecasting 27% GMV growth and roughly $1 billion in adjusted operating income. This optimism is supported by resilient consumer spending and Affirm's valuation, which Oppenheimer deems attractive at less than 1x its estimated next-twelve-month EV/EBITDA to EBITDA growth ratio. The firm's risk resilience is attributed to its underwriting model, which focuses on higher-quality borrowers and assesses risk on a per-transaction basis, providing flexibility should macroeconomic conditions worsen.

Key Decisions for Investors

• Investors may consider Oppenheimer's 'Outperform' rating and attractive valuation as a basis to evaluate long positions, given the firm's demonstrated history of market share capture and strong growth projections.
• It is crucial to monitor Affirm's upcoming official guidance for FY26 to see how management plans to offset the loss of the Walmart partnership and validate the analyst's expectation of an earnings beat.
• Key performance indicators to watch include quarterly GMV growth relative to competitors and net charge-off rates, as any deviation from the modest increase anticipated could challenge the bullish thesis.
• The resilience of consumer spending is a key macro factor; investors should track retail and card volume data, as the current strength underpins the positive outlook for the BNPL sector.