There's a buying opportunity in Affirm after the buy now, pay later company's quarterly earnings report Friday drove down the stock 5%, according to Bank of America. The bank reiterated its buy rating on Affirm and raised its 12-month price target on the stock to $88 from $82, suggesting 37% upside from Friday's close. Affirm has rallied 32% over the past month. The company's 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," Bank of America analyst Matthew O'Neill wrote Monday in a report to clients. "Results came in ahead of expectations across [gross merchandise value], [revenue less transaction costs], and operating income, driven by disciplined underwriting, healthy consumer demand, and improving monetization trends, underscoring the resilience of the model amid a fluid macro backdrop." Affirm on Friday posted strong fiscal third-quarter financial results and forecasts for the current fiscal year, reflecting tailwinds for its business that included an "extremely constructive" funding backdrop despite broader macroeconomic volatility, according to the analyst. The San Francisco-based company booked $1.04 billion in revenue for the third quarter, topping the $995.3 million expected by analysts polled by FactSet, and $281 million in operating income, excluding some items, versus the Street's consensus estimate of $248.9 million. For the fiscal year ending June 30, Affirm forecast revenue of $4.175 billion to $4.205 billion, above analysts' consensus estimate of $4.14 billion. The 5% pullback Friday after Affirm's rally the past month doesn't mean the stock won't continue gaining ground, according to Bank of America. "While results were better than expected the stock traded off modestly and we view this as a brief air pocket until the medium-term outlook is updated at the 5/12 Investor Forum," O'Neill wrote. Bank of America's call matches the consensus on Wall Street, where 24 of 32 analysts covering Affirm rate it a buy or strong buy, LSEG data shows. Shares have risen 38% over the past year, with almost all of that gain coming in the past month.
