Affirm Holdings ( NASDAQ: AFRM ) stock plunged 15% in Thursday premarket trading after the Buy Now, Pay Later financing company posted disappointing fiscal Q2 revenue and cut its guidance for FY2023 (which ends June 30, 2023). As a result of the outlook and Q2 results, RBC Capital Markets analyst Daniel Perlin downgraded the stock to Sector Perform from Outperform.
The combination of higher funding costs, the lag in pricing action, and expected deceleration in gross merchandise volume and revenue "points to a more challenging environment ahead," the analyst said in a note to clients. "Although management reiterated its commitment to achieving adjusted operating income as the company exits FY23, we are slightly less convinced," Perlin said.
He also noted that Affirm ( AFRM ) disclosed in its 10-Q that Amazon ( AMZN ) is now its largest merchant partner, based on FY23e GMV, representing ~23% of total GMV during its Q2. However, Perlin points out that the exclusivity pact with Amazon expired on Jan. 31.
Perlin cut his price target for Affirm ( AFRM ) to $17 from $23.
In contrast, Truist analyst Andrew Jeffrey keeps a Buy rating on Affirm ( AFRM ) as he sees its fiscal Q2 representing a trough in GMV and organic revenue growth. "We are bullish on BNPL and think Affirm is the category leader and an acquisition target," the analyst said.
Perlin's Sector Perform rating aligns with the average Wall Street rating of Hold and contrasts with the SA Quant rating of Strong Sell . Meanwhile, the average SA Author's rating is Buy.
See why SA contributor Bert Hochfeld expects Affirm ( AFRM ) to make it through the headwinds.
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Affirm Holdings stock sinks 15% after guidance cut, RBC analyst downgrade