Affirm will get a big boost from bank charter, says Needham
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Affirm's application for a bank charter will be a meaningful long-term driver for the company, according to Needham. The investment firm upgraded the buy now, pay later stock to buy from hold. Analyst Kyle Peterson also set a $100 price target for the name, which signals upside of 46%. Peterson's upgrade follows Affirm's application to establish Affirm Bank, a proposed Nevada-chartered industrial loan company. Under this license, Affirm Bank would operate as an independent subsidiary with its own set of internal controls and governance. AFRM 1Y mountain AFRM 1Y chart "We believe this could be a game-changer for AFRM as it would give AFRM access to deposit funding for loans, reduce third-party risk by moving several products in-house (rather than offering them through banking partners), while also potentially accelerating growth and/or product development," he wrote. "Given these dynamics, we are increasingly confident in AFRM's medium-term growth and profitability outlook." Peterson sees approval as likely given the current government's push towards deregulation and Affirm's track record of mature rick management. He believes a bigger financial benefit for Affirm through the deal would come from lower funding costs. The analyst added that owning a bank could also help Affirm bring other products in house. Currently, products like the Affirm Money Account and the Affirm Card are both offered through partnerships with banks. "We believe moving these products in-house could reduce friction with users and improve unit economics, both of which we expect could help Affirm accelerate product launch efforts in other areas down the road. We believe this would serve as an additional MT tailwind and add another leg to the growth story," he wrote. Shares of Affirm have surged 25% in the past year.