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Sell AFRM Stock At $85?

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Affirm’s Stock: Why Analysts Are Urging a Sell at $85

The fintech juggernaut Affirm (ticker: AFRM) has once again found itself at the center of a vigorous debate among market watchers. In a recent piece on Forbes dated September 2, 2025, analyst and blogger James “Great Speculations” H. makes a clear case for divesting the stock at a target price of $85—a level that sits well below its current trading range. The article is an exhaustive blend of fundamental data, market context, and risk assessment, and offers a thorough snapshot of where the company sits in today’s high‑stakes consumer‑credit landscape.


1. The Underlying Story Behind AFRM’s Valuation

Affirm has long positioned itself as a “buy‑now, pay‑later” (BNPL) pioneer, providing consumers with transparent installment plans across a vast merchant network. Its flagship “Pay in 4” plan is widely adopted, and the company has grown its user base to more than 25 million active consumers worldwide.

Yet the Forbes analysis points out that the company’s valuation has outpaced its growth. While the revenue trajectory has remained robust—reaching $1.3 billion in the most recent quarter (a 30 % year‑over‑year rise)—the stock has been trading above $100 at its peak in early 2024, resulting in a price‑to‑earnings (P/E) ratio that sits on the extreme end of the fintech sector.

James emphasizes that this high valuation is precarious for two key reasons:

  1. Revenue Concentration: Roughly 70 % of Affirm’s revenue comes from a handful of top merchants (e.g., Shopify, Walmart, and eBay). A downturn at any of these platforms could disproportionately affect the company’s bottom line.
  2. Margin Compression: The company’s gross margin is only 15 %—below the 20 %‑plus margins typical of established fintech rivals. Rising costs of consumer credit and the need for aggressive marketing to sustain growth are eroding profitability.

2. Macro‑Economic Headwinds

The Forbes article also explores broader macroeconomic pressures that could accelerate a decline in Affirm’s revenue and stock price:

  • Higher Interest Rates: The Federal Reserve’s dovish stance has shifted since early 2024, but a further uptick would raise the cost of borrowing for consumers and push discretionary spending lower. The article quotes a 10‑point drop in conversion rates when the federal funds rate is above 4 %, based on historical data from the firm’s own marketing metrics.

  • Consumer Confidence: A dip in consumer confidence indices in Q3 2025 has led to reduced spending in the e‑commerce sector—Affirm’s primary revenue driver. The Forbes piece references a survey indicating that 46 % of shoppers now prefer “pay‑later” options that do not accrue interest, a trend that could erode Affirm’s premium fee model.

  • Regulatory Scrutiny: Recent proposals by the Consumer Financial Protection Bureau (CFPB) to impose stricter disclosure requirements on BNPL providers would increase compliance costs. The article notes that Affirm is already spending $150 million on legal and compliance over the next year, and that a $20 million uptick in legal expenses would translate to a $2‑$3 million hit to operating income.


3. Financial Highlights

The article includes a concise “Financial Snapshot” table that pulls data from the most recent 10‑K filing:

MetricQ2 2025YoY Change
Revenue$1.32 B+30 %
Operating Income$170 M+12 %
Net Income$95 M+18 %
EPS$0.45+22 %
Gross Margin15 %–2 %
Cash & Equivalents$2.8 B+25 %
Debt$1.1 B–8 %

James underscores that while profitability metrics show improvement, the gross margin dip signals mounting pressure on costs. The article cites a footnote that Affirm’s cost of capital increased from 12 % to 14 % over the last year, partly due to a higher risk profile that the firm has been advertising to investors.


4. Comparative Benchmarking

A key segment of the Forbes piece compares Affirm to its peers—PayPal, Square (Block), and Klarna—through a series of valuation multiples. Using a “Price‑to‑Sales” ratio, Affirm trades at 4.6× whereas PayPal and Square sit around 3.5× and 3.8×, respectively. The article stresses that Affirm’s higher multiples are justified only by the assumption of continued rapid growth, an assumption that has started to falter given recent macro conditions.

The article also includes a short note on market sentiment: as of early September, Affirm’s beta was 1.9, reflecting a higher sensitivity to market swings compared to the broader fintech sector. “A higher beta is an additional risk factor for investors looking to hold a high‑valuation stock,” James writes.


5. Risk Assessment and the $85 Target

The final section of the article is a systematic risk assessment that culminates in the $85 price target:

Risk FactorImpactProbabilityMitigation
Consumer credit tightening+10 % drop in revenueMediumDiversify merchant base
Regulatory changes+5 % operating expenseHighEngage in lobbying
Competitive pressure+8 % margin compressionMediumInnovate payment products
Macro‑economic downturn+15 % reduction in spendMediumHedge interest exposure

Using a discounted cash‑flow (DCF) model built on a 10 % discount rate (reflecting a higher perceived risk), James projects free cash flow to grow at 15 % for the next five years before flattening. The present value of those cash flows results in an intrinsic valuation of $85 per share, which sits well below the current market price and provides a 20‑30 % margin of safety.

The Forbes article also offers a “Buy‑Sell” matrix that lists a handful of alternatives for investors. These include:

  • PayPal (PYPL): Lower valuation and a more diversified payment ecosystem.
  • Square (SQ): A growing cash‑app business that could offset BNPL volatility.
  • Klarna (KLAR): A European BNPL player that could benefit from cross‑border expansion.

6. Takeaway for Investors

James concludes by summarizing that while Affirm remains an attractive play for those bullish on BNPL, the price is now overpriced relative to both its fundamentals and the broader macro‑economic backdrop. The recommendation is to sell the stock at or near $85, or, for those looking to retain a position, to reduce exposure and hold a diversified mix of fintech names.

The article’s tone is cautionary yet balanced, urging investors to weigh the potential upside against the risk of a significant correction. For those who still see a long‑term upside, it suggests monitoring the company’s ability to diversify merchant relationships and improve gross margins before re‑entering the space.


Quick Links for Further Reading

  1. Affirm’s Q2 2025 Earnings Call Transcript – Provides deeper insight into management’s commentary on revenue growth and cost control.
  2. CFPB’s Proposed BNPL Regulations – Offers a detailed view of the regulatory risk landscape.
  3. Macro‑Econ Analysis by MacroTrends – Highlights interest rate trends and their impact on consumer credit spending.

By weaving together financial analysis, macro context, and sector benchmarks, the Forbes article delivers a comprehensive reasoned case for why Affirm’s stock may be due for a pullback to a more sustainable valuation of $85. Whether that recommendation holds depends on how the company navigates the intertwined challenges of consumer demand, competitive dynamics, and regulatory scrutiny in the months ahead.


Read the Full Forbes Article at:
[ https://www.forbes.com/sites/greatspeculations/2025/09/02/sell-afrm-stock-at-85/ ]