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Sunday, June 4, 2023

Affirm: What Do Amazon Shoppers Make of BNPL Deal?

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There’s no way to verify this, but it’s likely that as the week kicked into action, cases of the Monday blues were relatively low amongst Affirm (AFRM) investors.

Affirm shares soared 43% in response to the news that the company has partnered with Amazon. Affirm’s buy-now-pay-later (BNPL) offering is being tested by the ecommerce giant and should be added to the payment options over the coming months.

So, great for Affirm and its investors but what do Amazon shoppers make of this development? Mizuho analyst Dan Dolev conducted a survey to find out.

Dolev notes that nearly 50% of 200 Amazon customers surveyed are likely to use the new option. More accurately, 22% are ‘very likely,’ while 26% are ‘somewhat likely.’ Affirm customers, naturally, are even more enthusiastic, with 78% keen to use BNPL on Amazon.

As only 18% of those surveyed are also Affirm customers, Dolev sees “significant opportunity for AFRM to expand its customer base.” In fact, the analyst estimates the deal could add 20-30% “potential upside” to Affirm’s 2023 GMV (gross merchandise volume) and between a 5 to 10% uptick to sales.

The survey also found that 46% of purchases are made with debit, and Dolev thinks these are “more likely to convert to BNPL than purchases using credit.”

So, is there any downside to the deal? Only if you are Apple, says Dolev.

“We believe the sheer headline in partnering with the #1 US e-comm retailer could launch AFRM into higher orbit,” the analyst summed up, “Making the fear of competition from Apple Pay earlier this summer seem like a long-forgotten bad dream.”

Accordingly, Dolev rates AFRM shares a Buy, while boosting his price target from $76 to $110. After Monday’s huge share gains, there’s room for ~12% uptick. (To watch Dolev’s track record, click here)

Overall, Affirm has a Moderate Buy rating from the analyst consensus, based on 8 reviews breaking down to 5 Buys, 2 Holds, and 1 Sell. However, shares have blasted through the average price target, which at $90.38, suggests the stock will lose ~9% of its value in the year ahead. It will be interesting to see if other analysts update their AFRM targets shortly. (See AFRM stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The post Affirm: What Do Amazon Shoppers Make of BNPL Deal? appeared first on TipRanks Financial Blog.

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