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Affirm Holdings, Inc. AFRM is well poised for growth with strong Gross Merchandise Volume (“GMV”) growth potential, an expanding buy now, pay later (BNPL) landscape and rising active merchant numbers. Additionally, its growing transaction volumes and interest income present a compelling investment opportunity.

Affirm — with a market cap of almost $9.1 billion — is a platform for digital and mobile-first commerce that offers financial products. Now, let’s take a look at its recent price performance to gauge investor sentiment toward the stock.

Investor confidence is pretty high now as the stock has experienced an impressive 85.2% surge in the past year against the industry’s decline of 7.9%.

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Due to its solid prospects, this currently Zacks Rank #2 (Buy) stock presents an attractive investment opportunity for investors at the moment. Also, it currently has a VGM Score of B, where V stands for Value, G stands for Growth and M stands for Momentum. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for AFRM’s current-year earnings indicates a 40.7% year-over-year improvement. The stock has witnessed five upward estimate revisions in the past 30 days against none in the opposite direction. Affirm beat on earnings in two of the last four quarters and missed twice.

The consensus mark for current-year revenues is pegged at nearly $2.3 billion, suggesting a 42.6% rise from the prior year’s reported number. The expected growth will be supported by increasing GMV and transaction volumes. Affirm forecasts fourth-quarter fiscal 2024 GMV to be in the range of $6.75-$6.95 billion alone. Further, with its expanding operations GMV will continue to rise. The company has set a goal to achieve $50 billion in GMV in the medium term.

The company is looking for opportunities beyond U.S. retail to fuel its growth. It is expected to leverage its partners’ penetration rate in the U.K. and other significant markets in Europe to further boost its GMV, thereby improving its revenue. By leveraging its partners' penetration in high-growth markets, the company can achieve substantial returns without the need for additional partnerships, at least initially.

Affirm continues to reap the rewards of a high interest rate environment, which is boosting its interest income. Additionally, potential interest rate cuts from the Fed can increase Affirm’s BNPL loan volumes in the future.

Key Risks

However, there are a few factors that investors should keep an eye on. Increasing competition in the BNPL space can work as a headwind for the company. Also, higher funding costs due to high interest rates and limited consumer loan demand in the secondary market may affect its growth. Nevertheless, we believe that a systematic and strategic plan of action will drive AFRM’s performance in the long term.

Other Key Picks

Investors interested in the broader Business Services space can look at some other top-ranked stocks like Global Payments Inc. GPN, Paysafe Limited PSFE and WEX Inc. WEX, each carrying a Zacks Rank #2 at present.

The Zacks Consensus Estimate for Global Payments’ 2024 earnings is currently pegged at $11.63 per share, indicating 11.6% year-over-year growth. It beat estimates in each of the past four quarters with an average surprise of 1.1%. The consensus mark for GPN’s revenues of $9.2 billion suggests a 6.4% increase from the year-ago level.

The Zacks Consensus Estimate for Paysafe’s current-year earnings is now pegged at $2.47 per share, indicating 6% year-over-year growth. It beat earnings estimates thrice in the past four quarters and missed once, with an average surprise of 18.3%. The consensus mark for PSFE’s revenues of $1.7 billion suggests a 6.5% increase from the year-ago level.

The Zacks Consensus Estimate for WEX’s 2024 earnings of $16.26 per share suggests 9.8% year-over-year growth. It beat earnings estimates thrice in the past four quarters and missed once, with an average surprise of 3.3%. The consensus estimate for WEX’s current year revenues is pegged at $2.7 billion, indicating a 7.6% increase from a year ago.

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Global Payments Inc. (GPN) : Free Stock Analysis Report

WEX Inc. (WEX) : Free Stock Analysis Report

Affirm Holdings, Inc. (AFRM) : Free Stock Analysis Report

Paysafe Limited (PSFE) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.