Buy now, pay later products provider Affirm Holdings, Inc. (NASDAQ:AFRM) is one of Cramer’s favorite stocks. The shares are down by 3% over the past year and are up by 4% year-to-date. On multiple occasions, the CNBC TV host has praised the firm’s CEO. For instance, in January, Cramer predicted that the shares would touch the $100 mark. The latest closing price for Affirm Holdings, Inc. (NASDAQ:AFRM) is $77. Here is what he said about the firm on August 17th:
“I think that Workday, that was a good run. How about that. That was a very good run. And I noticed that Salesforce already started coming down. We do have a Salesforce conference coming up and I know Marc Benioff’s going to say that everyone’s just dead wrong. Can everyone be dead wrong? Conceivably. But, what I don’t like is, I didn’t put Affirm in this group. And the reason I didn’t put Affirm in this group because that one should be at a hundred. That one is real. That one has the growth that I want. That one has the CEO that I liked. That one has short sellers and people who don’t really understand that Levchin, he’s brilliant. Max is brilliant. And I just think that that one is the only one I would buy right here.”
As is with most stocks, the debate for Affirm Holdings, Inc. (NASDAQ:AFRM) surrounds its valuation as well. The stock currently trades at a forward P/E ratio of 39.84, which is more than twice that of JPMorgan and more than thrice that of PayPal. As a result, the growth expectations for Affirm Holdings, Inc. (NASDAQ:AFRM) appear to be rather high. They are a strong gross merchandise volume (GMV) growth of 35% annually, revenue less transaction costs growth of 41% (to outpace GMV growth) and active customer growth of 22%. Consequently, the firm appears to be feeding its merchant growth into customer growth.
Additionally, Affirm Holdings, Inc. (NASDAQ:AFRM)’s point of sale algorithmic data also enables it to adjust and avoid defaults. Yet, at the end of the day, the firm nevertheless relies on consumer spending and interest rates, and economic turmoil stemming from inflation could generate headwinds through both of these. Additionally, funding costs are also trickier due to the firm’s reliance on private credit markets.
Shifting towards Salesforce Inc. (NYSE:CRM), the shares are down by 17.5% year-to-date. Over multiple appearances, Cramer has discussed the split in the firm’s AI and non-AI businesses. This split is also at the heart of the debate surrounding the firm. Salesforce Inc. (NYSE:CRM)’s Agentforce, which is its AI platform, marked 205% annual ARR growth, $260 million sequential growth, 152% sequential token processed growth and 111% in sequential work unit growth to indicate that AI-related tailwinds are in place. Yet, at the same time, overall contribution by Agentforce remains muted as it represented two points of Q1 revenue growth. Additionally, the AI and data ARR also includes figures from Informatica, which makes it difficult to analyse the impact of Agentforce. Consequently, should Salesforce Inc. (NYSE:CRM)’s legacy platforms be cannibalized by external AI platforms while Agentforce doesn’t grow comparably, the firm could experience headwinds.
Looking at hedge fund sentiment, 101 funds had held a stake in Salesforce Inc. (NYSE:CRM), which was a dip over Q4’s 115. As for AFRM, 61 funds had held a stake for a negligible dip over Q4’s 63. Short interest as a percentage of float is 4.15% for Salesforce Inc. (NYSE:CRM) and 5.27% for AFRM.
While Insider Monkey acknowledges the risk and potential of CRM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than CRM that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
