Affirm Holdings stock slides after Mizuho pares Buy Now, Pay Later price targets

Dec. 14, 2021 10:36 AM ETAffirm Holdings, Inc. (AFRM), PYPL, SQAMZN, PTON, AFTPYBy: Liz Kiesche, SA News Editor19 Comments

BNPL Buy now pay later online shopping concept.

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  • Mizuho analyst Dan Dolev trims price targets for Buy Now, Pay Later names after taking into account some potential risks in the sector, namely rising delinquencies, users' increasing debt loads, and users' limited financial flexibility.
  • Overall, delinquency is worsening at major industry participants, he writes, with delinquent receivables nearly quadrupling at Afterpay (OTCPK:AFTPY) vs. recent levels and net charge-offs rising by ~1,000 basis points as a percentage of gross receivables at Sezzle, which isn't publicly traded.
  • Affirm Holdings (NASDAQ:AFRM) stock dips 4.2% after Dolev reduces its price target to $140 from $180. That's based on reducing his base case multiple to 26x from 32x. "The multiple reduction better reflects potential market risks Affirm (AFRM) faces despite having significant GMV upside potential from the Amazon (NASDAQ:AMZN) opportunity, in our view," Dolev said.
  • Note that the decline may also be related to Peloton's (NASDAQ:PTON) drop after a character in the "Sex and The City" revival collapsed then died when using the exercise bike. Peloton (PTON) is Affirm's (AFRM) largest client for its BNPL products. Also, Peloton's weakness resumed after a report that the company halted new product projects for next year.
  • Dolev reduces Block's (NYSE:SQ) (formerly Square) Cash app estimates to reflect company comments and to incorporate more conservative user growth expectations. As a result, its price target drops to $285 from $380.
  • Though BNPL is still a small part of PayPal's (NASDAQ:PYPL) TPV, "PYPL is visible in this space given the size of its user base. We believe this could drive perception concerns as BNPL comes under more scrutiny," the analyst writes. He cuts PayPal's price target to $225 from $275.
  • There's still a wide gap between Affirm's (AFRM) price/earnings (trailing 12 months) and those of Block (SQ) and PayPal (PYPL) as seen in the graph below.
  • SA contributor Julian Lin takes a deep dive into Affirm.

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