Affirm cut to underweight on interest rate and competition headwinds

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Analysts told investors that higher rates and competition will continue to pressure the company’s margins.

“We expect persistently higher rates to pressure operating margins as AFRM needs to hold more loans on balance sheet,” the analysts wrote. “In addition, we expect tighter underwriting standards, increased pricing, and the re-introduction of student debt payments to cause an incremental slowdown in revenue growth over the next year.”

As a result, Piper Sandler sees the headwinds resulting in difficulty for AFRM to generate the 24% revenue growth implied by consensus estimates. The analysts also noted that AFRM’s revenue growth decelerated to 11% and 7% in the past two quarters as AFRM held more loans on its balance sheet.