Affirm stock forms a bullish setup as BoFA hints at a surge ahead

Affirm stock price has remained in a tight range in the past few weeks, and its recent earnings provided no boost. It was trading at $65.45 on Tuesday, inside the narrow range where it has remained at since April 17 this year. Still, the AFRM stock has formed a highly bullish pattern as Bank of America analysts predict.

Bank of America sees more upside for Affirm stock

Wall Street analysts believe that the Affirm stock price has more gains ahead. In a recent note, Bank of America analysts boosted the target to $88 from the previous $82. They noted that the company’s recent earnings:

“reinforces our view that Affirm continues to operate as a best-in-class underwriter, even with the highest non-prime exposure in its peer set.”

More Wall Street analysts have boosted their estimates for the company. Oppenheimer pros boosted the target to $87, a 31% increase from the current level. Morgan Stanley maintained its overweight target, pointing to a surge to $79. 

JPMorgan, Stephens, and Needham boosted their targets to over $88 after its recent earnings. As a result, the average estimate among analysts has jumped to $85, much higher than the current $66. 

Affirm’s business is thriving amid the soaring inflation

Affirm, a leader in the Buy Now Pay Later (BNPL) industry, has become a popular name in the US as many Americans have continued to face substantial financial difficulties as the Iran war continued. 

A recent report showed that credit card debt soared to $1.3 trillion early this year. In a statement that caused outrage last week, Kevin Hassett, a top Trump advisor, boasted that credit card spending was going through the roof.

BNPL companies are often seen as better alternatives to credit cards because they allow customers to spread their costs over time. Affirm’s recent report showed that its gross merchandise volume (GMV) jumped by 35% in the last quarter to over 40%. At the same time, the total transactions jumped by 45%, with its revenue soaring by 33% to over $1.03 billion. Its active customers jumped to over 25.6 million.

Affirm’s profitability improved, with the operating income soaring by $97 million to $88 million. Most notably, despite the financial hardships among customers, Affirm’s delinquency rates have not soared this year. 

The company believes that it has more room to run. It expects that its GMV will be between $13.15 billion and $13.45 billion in the fiscal fourth quarter, with its revenue rising to between $1.08 billion and $1.1 billion. The management will outline its growth initiatives today, May 12, when it holds its investor day event. 

Affirm stock price technical analysis

AFRM stock chart | Source: TradingView

Technical analysis suggests that the AFRM stock price has done well in the past few months as it soared from $42 in April to the current $66. A closer look shows that it has settled above the 200-day Exponential Moving Average (EMA).

At the same time, the stock has formed a bullish flag pattern. This pattern happens after a big jump that is followed by a rectangle consolidation. In most cases, this pattern normally leads to a strong surge over time.

If this happens, the stock will likely continue rising as bulls target the key resistance at $77.5, the 61.8% Fibonacci Retracement level. However, a drop below the 200-day moving average at $60 will invalidate the bullish outlook.