Morgan Stanley Downgrades Affirm, Removes Top Pick

Morgan Stanley Downgrades Affirm, Removes Top Pick

Morgan Stanley announced that it has downgraded Affirm Holdings Inc (NASDAQ:AFRM) from an Overweight to an Equal‑Weight rating and has removed the stock from its top‑pick list, citing valuation concerns after the share price rallied sharply since the late‑March lows.

The brokerage retained its $79 price target for the company, which corresponds to an implied valuation of roughly 23 times the firm’s fiscal year 2028 GAAP earnings per share estimate of $3.37. The stock is currently trading at about a 22‑times multiple, slightly above the implied 21‑times multiple that was in place in February.

Morgan Stanley also revised its FY28 GAAP EPS forecast upward by 14%, raising the estimate from $2.95 to $3.37. The analysts said that the resolution of earlier concerns around growth‑durability, funding execution and credit performance, together with a moderation of unit‑economics worries, now yields a more balanced risk‑reward profile. They emphasized that the downgrade is driven by valuation rather than any structural weakness, noting that management remains best‑in‑class and that the buy‑now‑pay‑later (BNPL) market continues to expand.

The firm expects investors to apply a roughly 20‑times earnings multiple to the business over the cycle, highlighting the importance of incremental earnings revisions to sustain sponsorship.

In parallel, Affirm disclosed a renewed and expanded forward‑flow agreement with CPP Investments, under which CPP will purchase $1.7 billion of the company’s installment loans. Analyst houses Susquehanna and Compass Point have each raised their price targets on the stock, while William Blair reiterated an Outperform rating.