Bank of America has upgraded Affirm's stock to a buy rating, citing potential profitability improvements and the positive impact of anticipated Federal Reserve rate cuts. The bank's analyst, Jason Kupferberg, noted that Affirm's shares have dropped 45% in 2024, but he sees a path for recovery with a price target of $36, indicating a potential 34% upside. Affirm, known for its buy now, pay later service, is expected to benefit from a lower interest rate environment, which would reduce funding costs and enhance loan sale gains. Recently, the company adjusted its merchant loan cap from 30% to 36% APR, which is expected to support profit margins and gross merchandise value growth. While the market anticipates multiple rate cuts in the coming years, some investors are skeptical about this outlook. Affirm's upcoming fiscal fourth-quarter report in late August is also viewed as a possible catalyst for a stock rebound, with expectations of a positive profitability message and solid guidance for future growth.
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