By Nate Wolf

Affirm Holdings is starting to turn a corner after a brutal start to 2026. Analysts at Morgan Stanley think the financial technology stock has room to run.

Morgan Stanley analyst James Faucette named Affirm a "Top Pick" in a in a research note Friday and reiterated an Overweight rating and a $76 price target on the stock. The buy now, pay later provider's valuation "looks too low," he said.

Affirm shares jumped 6.3% to $64.10 in premarket trading. The stock has dropped 19% this year as of Thursday's close of trading, in part because thousands of its loans are included in an embattled private credit fund known as LENDX.

"We see a particularly attractive setup over the next six months: a high probability of upward estimate revisions, a credible path to resolving the private credit overhang, and catalysts that could sharpen the market's view of the company's medium-term earnings power," Faucette wrote.

Let's go one by one, starting with the earnings estimates. Investors appear to be apprehensive about Affirm's ability to sustain both annual 30% gross-merchandise-volume growth and expand adjusted operating margins, Faucette said. Those weakened expectations mean "the catalyst path is unusually strong" ahead of the company's Investor Forum on May 12.

Morgan Stanley expects Affirm to introduce an earnings-per-share target of $2.50 to $3 for fiscal 2028, which would be above the consensus forecast of $2.42.

The private credit fears are also overblown, Faucette argued. Investors are wary that private credit stress may weaken the spreads in Affirm's asset-backed security deals. But Morgan Stanley is yet to see any evidence of that dynamic. In fact, peers have continued to tap private credit demand, with Upstart Holdings and Klarna Group recently announcing forward-flow and whole-loan sale facilities.

"Given Affirm's best-in-class credit performance, we would expect Affirm to continue expanding funding capacity at favorable spreads," Faucette wrote.

Much like analysts at Citi Research predicted earlier this week, Morgan Stanley expects the stock to jump around the May Investor Forum. The company may not forecast annual 30% gross-merchandise-volume growth, but the median scenario could be around 25%. Its margin growth outlook should also be solid, both Citi and Morgan Stanley said.

"AFRM offers what we view as one of the most attractive risk-reward setups in our coverage," Faucette wrote.

Write to Nate Wolf at nate.wolf@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 17, 2026 10:01 ET (14:01 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.