On Tuesday, Affirm Holdings Inc. (NASDAQ:AFRM) shares edged slightly lower, extending Monday’s declines after Piper Jaffray analysts initiated coverage with a Neutral rating.
The stock is now down more than 5% from Friday’s close. Analyst Kevin Barker thinks the Buy Now Pay Later (BNPL) industry could suffer from increasing credit card delinquency rates.
The report comes at the back of a positive survey published over the weekend that showed consumers will be using BNPL services more during the holiday season.
The analyst sees consumer lenders experiencing rising delinquency and net charge-off rate in FQ4 2021 and throughout 2022 as consumer credit returns to pre-pandemic levels.
Is Affirm overvalued?
From an investment perspective, Affirm Holdings shares trade at a steep price-sales ratio of about 44.05, thus making the stock too expensive for value investors. In addition, analysts expect its bottom line to worsen by more than 208% this year, before bouncing back by 37.80% next year.
Therefore, Affirm stock does not look like an ideal option for short-term investors.
However, those willing to overlook the short-term turbulence could benefit significantly in the long term amid the growing popularity of BNPL services.
Source – TradingView
Technically, Affirm shares seem to be trading within a descending channel formation in the intraday chart. However, the stock has recently bounced off the key support to retest the trendline resistance.
Therefore, investors could target extended pullbacks at about $120.31, or lower at $107.52, while $145.37 and $157.74 are resistance levels.
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