Affirm could rise 18% as consumers plan to step up use of buy now, pay later services, Bank of America says

Affirm CEO Max Levchin.

Bank of America raised its price target for Affirm to $160 from $119 on Tuesday.
It said Affirm posted growth in both app downloads and monthly active users in September, outpacing peers AfterPay, Klarna and QuadPay/Zip.
Affirm has recently signed deals with Target and Amazon.com for its buy now, pay later service.

Affirm‘s installment-pay business has been growing at a time of deceleration for its peers, Bank of America said Tuesday in raising its price target on shares of the fintech firm.

Bank of America increased its price objective on Affirm to $160 from $119. The hike implies the stock could rise 18% from Monday’s closing price of $135.03.

“We believe a higher multiple is justified due to AFRM’s current business momentum,” it said, noting it tracks app downloads and monthly active users in the US using data from SensorTower, an app analysis company.

Affirm shares on Tuesday rose as much as 4.1% then trimmed the gain to 3%. The stock has climbed about 42% since their trading debut in January.

The investment bank said Affirm was the only buy-now, pay-later vendor it tracks that registered growth in September for both app downloads and monthly active users compared with August and with the first half of 2021. It said the acceleration was driven in part by Shopify expanding Affirm’s installment-pay service to all its US merchants in June. Affirm and Shopify first announced their partnership last year.

In a survey conducted by the bank, users of buy now, pay later services said they plan on using them more often in the next 12 months. According to the survey, 54% of users said they plan to use buy now, pay later eight or more times over the next year, up from 47% in the bank’s last survey of the sector.

Last week, Target said its online shoppers could use Affirm to pay for purchases of more than $100. Amazon in late September said it was partnering with Affirm to offer installed payments to its customers. Both announcements propelled Affirm’s shares higher.

Affirm’s wide-ranging product roadmap unveiled late last month should enable the company to be a long-term winner in the burgeoning buy-now, pay-later industry, said BofA. It also foresees Affirm becoming a broader provider of fintech services such as banking, crypto assets, shopping, and rewards as the company pursues its “SuperApp” strategy.

Affirm’s app download growth ramped up in September, to 121% compared with 111% in August. AfterPay‘s downloads increased 68% versus 118% in August. “Surprisingly, Klarna saw growth turn negative (to -7%) for the first time,” said BofA, saying app downloads increased by 54% in August.

Privately held QuadPay/Zip registered flat growth year over year versus a 63% increase in August, the bank said.

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