Affirm Holdings Inc: Even Messi Needs a Water Break; Downgrade to Equal-weight and Remove Top Pick

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Affirm Holdings Inc: Even Messi Needs a Water Break; Downgrade to Equal-weight and Remove Top Pick

IdeaMConcerns that incremental growth would be accompanied by lower unit economics,

particularly via 0% APR and international, have also moderated. We remain

confident the business can sustain a broadly stable interest-bearing mix, with 0%

APR expected to remain below 25% of GMV, while Card attach drives upward

pressure on interest-bearing mix (Card is ~80% interest-bearing GMV on Card vs.

the core business at ~70%) and thus, serves as a tailwind to RLTC margin with

incremental attach due to higher interest bearing mix and higher credit interchange

via Flex Credential. Bottom line, while we remain positive on the longer-term

growth potential, with key debates having moved toward resolution and

valuation now reflecting more of our thesis, we are stepping to the sidelines

awaiting a more attractive entry point or evidence that FY28 GAAP EPS can

move materially above our current significantly above estimates and buyside

expectations.

Revisions have done the heavy lifting. In early February, the stock was trading at

an implied ~21x FY28 GAAP EPS multiple on our prior $2.95 estimate. Today, our

FY28 GAAP EPS estimate is $3.37, up 14%, and remains well above consensus of

$2.50, while the stock trades at ~22x our FY28 GAAP EPS estimate. We appreciate

that the move higher has been driven almost entirely by revisions, yet the multiple

has been volatile in the interim, troughing at ~17x consensus estimates at the YTD

low on 3/27 versus ~31x on consensus estimates today. Through the cycle, we

believe investors want to durably assign a ~20x multiple to the business, which, in

our view, places more importance on the magnitude of incremental revisions from