Home NewsStock Market News Interest rate hike + high inflation!Goldman Sachs: BNPL’s outlook is bad, leader Affirm fell more than 8% |

Interest rate hike + high inflation!Goldman Sachs: BNPL’s outlook is bad, leader Affirm fell more than 8% |

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Interest rate hike + high inflation!Goldman Sachs: BNPL’s outlook is bad, leader Affirm fell more than 8% |


Shares of Affirm (AFRM-US) tumbled more than 8% on Monday as analysts at Goldman Sachs saw multiple challenges ahead despite its growing and leading position in the buy now pay later (BNPL) business.

Goldman Sachs analyst Michael Ng started tracking Affirm with a “neutral” rating and a $22 price target. Affirm “should be a major driver and beneficiary of the growth of the U.S. BNPL industry,” he wrote in a research note, but the company faces a potential risk of consumer weakness as high inflation and rising interest rates weigh on household spending.

Rising credit loss provisions and funding costs against a backdrop of rising interest rates and weak consumer credit could weigh on the company’s trading margins, Ng said.

The BNPL business allows consumers to pay in short-term zero-interest instalments, and peers include Klarna and Afterpay. Recently, PayPal (PYPL-US) has also launched a new BNPL option, and Apple (AAPL-US) has also announced its upcoming entry into the BNPL field.

Ng also mentioned that peer competition is also a worrying factor for Affirm’s prospects.

In addition to increasing competition and rising interest rates, regulators around the world are also increasingly concerned and aware of BNPL products, and may impose regulation, Ng said.

“While we believe Affirm is in the best position among BNPL providers in terms of consumer disclosure, product transparency and underwriting, regulation poses a risk to all providers as it can slow consumer and merchant adoption,” Ng wrote. .

But on the plus side, Ng also sees potential advantages for the company, such as partnerships with some of the larger retailers, including Walmart (WMT-US), Amazon (AMZN-US), and Target (TGT-US), among others. Shoppers can choose to pay at these retailers’ online stores via Affirm’s BNPL payment method.

According to the FactSet survey, of the 16 analysts surveyed, 5, like Ng, rate the stock a “continue hold,” 8 recommend a “buy,” but 3 rate it a “sell.”

Affirm fell 8.44 percent to close at $21.37 on Monday. The stock has struggled to gain traction this year, down 78% year to date and down 87% from last year’s closing high of $168.52.

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