Scotiabank Challenges Wall Street's Valuation of Affirm with Sector Outperform Rating

Scotiabank has initiated coverage of Affirm (AFRM) with a Sector Outperform rating and $95 price target, sending shares up approximately 6% on September 2. The bank argues that Wall Street incorrectly values Affirm as a cyclical lending business rather than a capital-efficient payments platform.

According to Scotiabank, the company's gross merchandise volume continues expanding at significant scale, with improved conversion to operating profit. This represents precisely the type of margin expansion and operating leverage that attracts growth-oriented investors.

The Affirm Card is driving transaction volume toward more frequent, consumer-initiated purchases while simultaneously diversifying away from merchant partner concentration risk. The card also generates comprehensive consumer spending insights, which should strengthen Affirm's underwriting capabilities over time.

Wall Street firms have recently boosted price targets for Affirm, now spanning from $88 to $124. Scotiabank isn't alone in expressing increased optimism, with multiple research firms elevating their price objectives following Affirm's impressive fourth-quarter financial performance.