Affirm upgraded as Needham says bank license could be a 'game-changer'

Investing.com -- Needham & Company upgraded Affirm to Buy from Hold in a note on Tuesday, saying the company’s decision to apply for a bank license could materially reshape its funding model, product roadmap and long-term earnings power.

Analyst Kyle Peterson told clients that the move “could be a game-changer for AFRM” and gives the firm “incremental confidence in the durability of the growth outlook.”

Needham set a $100 price target on AFRM shares.

Affirm disclosed it has applied to the Nevada Financial Institutions Division and the Federal Deposit Insurance Corp. to establish Affirm Bank, an industrial loan company that would operate as an independent subsidiary.

The new entity would be led by John Marion, a veteran banking executive with experience at JPMorgan Chase, MVB Financial and Comenity Bank. Peterson wrote that “the deregulation push by the current administration makes approval likely.”

The biggest financial impact, Needham said, would come from reduced funding costs as Affirm shifts away from warehouse and securitisation lines.

Needham estimates these lines carry “costs of 5-8%,” while FDIC-insured deposits would cost closer to “3-4%.” Fully transitioning to deposits could be “35%+ accretive to GAAP EPS,” the firm said, calling deposits the “stickiest source of funding available.”

A banking license could also accelerate product development by bringing the Affirm Card and Affirm Money Account in-house. Needham believes this shift “could reduce friction with users and improve unit economics,” providing a medium-term tailwind.

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