Investing.com -- Morgan Stanley downgraded Affirm Holdings to Equal-weight from Overweight in a note on Thursday and removed the stock from its Top Pick list, arguing that the key concerns underpinning its bullish thesis have largely been resolved and the shares now reflect fair value.

Analyst James Faucette told investors that the move is "a valuation call, not a structural one," with the firm's conviction on Affirm's long-term positioning remaining intact.

"Affirm remains, in our view, one of the highest quality fintech assets in our coverage," Faucette wrote, citing best-in-class management, differentiated product capabilities and direct exposure to buy now, pay later category share gains.

The bank said three key concerns at the time of its original upgrade, GMV durability, funding execution and credit performance, "have largely been resolved," with Affirm demonstrating "programmatic and best-in-class execution across ABS and forward flow channels."

Revisions have driven the stock's move higher, with Morgan Stanley's fiscal year 2028 GAAP EPS estimate rising to $3.37 from $2.95 in early February, well above the street consensus of $2.50.

However, the bank said further significant upward revisions, toward "$4.50 to $5 of FY28 GAAP EPS," would be needed to justify continued sponsorship at current levels.

Morgan Stanley left its $79 price target and estimates unchanged, describing its posture as "stepping to the sidelines awaiting a more attractive entry point."