Evercore adds Affirm to its Tactical Underperform list
Investing.com -- Evercore ISI added Affirm Holdings (NASDAQ: AFRM) to its Tactical Underperform (TAP) list, citing stretched valuations and the stock’s sharp rally heading into next week’s earnings.
Affirm shares have surged 115% since April and 18% since the start of August, making it the best performer year-to-date under Evercore’s coverage.
Analysts said the run-up leaves “the risk/reward less favorable heading into next week’s print than it was a few weeks ago.”
The broker highlighted that Affirm is trading near its recent peak valuation of high-20s next twelve months (NTM) EV/EBITDA, while management’s traditionally cautious stance limits the likelihood of guidance exceeding consensus estimates.
Still, Evercore maintained its Outperform rating on the stock, describing the TAP call as tactical rather than a change in its longer-term view.
“We still believe AFRM has the best risk platform in the space and will benefit over the longer-term from penetration in new verticals and geographies as well as product expansion,” the analysts led by Adam Frisch wrote.
Investors are awaiting Affirm’s fiscal fourth-quarter earnings on Aug. 28, when management will outline fiscal 2026 guidance.
Evercore expects guidance to be broadly in line with consensus, with gross merchandise volume (GMV) seen growing 27% ex-Walmart and revenue less transaction costs (RLTC) margin at 3.9%.
The firm noted risks tied to potential GMV declines at Walmart (NYSE: WMT), which accounts for about 5% of Affirm’s volume, after competitor Klarna expanded its OnePay offering.
Analysts also pointed to a margin dynamic. Notably, lower Walmart volumes could prove accretive given the partnership’s lower economics, though this might be offset by the continued growth in 0% annual percentage rate (APR) loans.
Over the past four quarters, Affirm has averaged a Revenue Less Transaction (JO:NTUJ) Costs (RLTC) margin of 4.1%, above management’s 3-4% target.
“We expect a 3.9% RLTC margin for FY26 (down 14bps YoY and in line with consensus) but note that could prove a little conservative with continued execution,” analysts said.