Affirm Holdings, Inc. (NASDAQ:AFRM) has underperformed the broader market year to date, but the tide is slowly turning. Robust growth in interest-bearing loans, a strategic partnership with Shopify in Australia, and accelerating volumes at Amazon provide multiple avenues for continued growth.
On September 12, Goldman Sachs raised its price target to $115 from $106, citing improving underlying fundamentals. The hike follows the company’s impressive fourth-quarter fiscal 2026 results, with revenues surging 33% to $1.2 billion and operating income rising $89 million to $147 million.
The robust revenue growth came as the company continued to attract more business interest-bearing loans. Interest income rose 35% in the fourth quarter, in line with a 33% increase in average net loans held for investment partners. More importantly, 80% of Affirm’s direct-to-consumer product loans carried interest at quarter-end, giving the company an increasingly meaningful source of recurring interest income.
Affirm Card Strengthens Growth Outlook
The investment bank has also touted the growth opportunity around Affirm Card, which is helping the company expand its relationship with consumers beyond individual BNPL transactions. Active cardholders more than doubled to 5.2 million, resulting in a 124% increase in Card GMV to $2.8 billion.
Management has already hinted at continued upside momentum by estimating a massive increase in GMV to $64 billion in fiscal 2027 and an adjusted operating margin of 30.5%. Against this backdrop, Wolfe Research analyst Darrin Peller upgraded the stock to Outperform with a $90 price target. According to the analyst, Affirm Holdings is a winner in the point-of-sale financing space.
Credit Risks Remain
Amid the robust gross merchandise volume increase, Affirm Holdings, Inc. faces significant risks from loan originations. Rapid GMV growth does not necessarily translate into higher profits if deteriorating credit quality drives loan losses and credit costs higher.
Additionally, the company’s core business remains highly sensitive to consumer credit quality. A weakening U.S. consumer, rising unemployment, or increased delinquencies could trigger higher provisions and reduce profitability.
The Buy Now Pay Later offering is also becoming increasingly competitive as banks, fintech companies, retailers, and payment networks expand installment-payment offerings. Competition could force Affirm to offer lower merchant fees or more attractive consumer terms, limiting revenue growth even if GMV continues rising.
Hedge Fund Positioning and Short Interest
The number of hedge funds holding stakes in Affirm Holdings, Inc. dropped to 57 in the second quarter from 61 in the first quarter, according to the Insider Monkey database. Durable Capital Partners reduced its stake by 22% to $360.89 million, while D1 Capital Partners trimmed its share count to a stake worth roughly $155.64 million. As of August 31, short interest stood at 15.67 million shares, equivalent to about 4.64% of shares outstanding, suggesting relatively modest bearish positioning.
The Verdict
Affirm is in a phase of robust growth characterized by expanding interest income and rapid adoption of Affirm Card. Ambitious GMV and margin targets also affirm significant operating leverage as scale increases. However, investors should closely monitor credit performance. The same expansion in interest-bearing loans could become a source of downside pressure if consumer delinquencies rise sharply.
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