Affirm stock price target raised to $93 by Stephens on strong earnings

Affirm Holdings (AFRM) reported robust Q4 FY25 results, with revenue reaching $876 million and Gross Merchandise Volume (GMV) surging 43%, both significantly exceeding analyst estimates. The company also provided strong FY26 guidance, driven by stable credit performance and direct-to-consumer growth, prompting multiple analyst price target increases, including Stephens to $93 and TD Cowen to $115. Despite the impressive operational performance and the stock's 92% year-over-year return, some firms, like Stephens, maintained cautious ratings such as 'Equal Weight,' citing valuation concerns at current levels.

Analysis

Affirm Holdings (AFRM) demonstrated significant operational outperformance in its fourth-quarter fiscal 2025 results, with key metrics substantially exceeding analyst expectations. Quarterly revenue grew 33% to $876 million, surpassing estimates of $835 million, while earnings per share of $0.20 beat the forecast of $0.12. The primary growth driver was a 43% surge in Gross Merchandise Volume (GMV), which outpaced both guidance and the 32% growth anticipated by analysts. This robust top-line performance was complemented by strong profitability, as Revenue less transaction costs (RLTC) increased by over 37% to $425 million. Critically, the company's credit performance remains stable, and its forward-looking fiscal 2026 guidance for GMV, revenue, and margins has exceeded both sell-side and buy-side expectations. This outlook is supported by strong direct-to-consumer growth, which is successfully offsetting the previously announced loss of Walmart as a partner. Despite the strong results, which prompted price target increases from firms like Stephens (to $93), Citizens JMP (to $105), and TD Cowen (to $115), a clear divergence exists regarding valuation. Both Stephens and Needham maintained neutral ratings ('Equal Weight' and 'Hold', respectively), explicitly citing concerns that the stock's current valuation, after a 92% run-up over the past year, already reflects the positive operational performance, suggesting limited upside from current levels.

Key Decisions for Investors

• Investors should weigh the company's exceptional operational outperformance and strong FY26 guidance against the significant valuation concerns highlighted by multiple analysts who maintained neutral ratings.
• Given the stock's 92% appreciation over the past year and a valuation flagged as high, it may be prudent to avoid chasing the stock at current levels and instead wait for a more attractive entry point.
• Closely monitor the company's ability to sustain its GMV growth and stable credit performance in subsequent quarters, as continued execution on these fronts is critical to justifying its premium valuation.