Affirm's (AFRM) recent stock price weakness presents a buying opportunity as a growth slump and consumer credit concerns are likely to be transient, Morgan Stanley said in a research note Tuesday.

The brokerage expects unit economics to improve as funding costs related to new loan origination decline with lower rates, while yields on the existing fixed-rate loan book stay elevated, according to the note.

If the company is granted an industrial loan company license to establish Affirm Bank, it could lower the costs it pays to partner banks, increase deposits, trim funding overheads for revolving credit products, and boost flexibility in new product launches, Morgan Stanley said.

The buy now, pay later segment is expected to continue to gain market share within broader ecommerce, and Affirm is positioned to be a key driver of that share gain, according to the brokerage.

The company's collaborations with Fiserv (FISV) and Fidelity National Information Services (FIS) can also support a meaningful step-function change in its business over the coming one to two years, the brokerage added.

Morgan Stanley upgraded the stock to overweight from equalweight, and adjusted its price target to $76 per share from $83.

Price: 61.59, Change: -0.40, Percent Change: -0.65