On Monday, shares of Affirm Holdings Inc. (NASDAQ: AFRM) climbed more than 45% after the announcement of the agreement with Amazon.com Inc. (NASDAQ: AMZN). The company’s popular âbuy now, pay laterâ feature will now be available on Amazon, allowing buyers to pay for expensive products in installments.
Customers will be able to split payments of $ 50.00 or more into multiple monthly installments. The deal will allow Amazon to capitalize on the booming installment loan market.
Affirm shares are now up over 75% this month. However, the recent spike has only helped AFRM achieve only 1% gains since the start of the year after plunging more than 65% between February and May.
So should you buy Affirm shares in September 2021?
From a valuation perspective, Affirm stocks trade at a high price-to-sell ratio of around 26.38, making the stock less attractive to value investors. However, investors expect AFRM’s earnings per share to rise 58.80% next year, which means growth investors might find it convincing.
In addition, current analysts’ estimates did not take into account the announcement of the deal with Amazon last week. Amazon has over 300 million customers. Thus, Affirm will have access to one of the largest market places in the world, thereby increasing its growth potential.
Therefore, although Affirm shares rose more than 45% on Monday, the stock has more leeway in the coming quarters.
Technical Snapshot: Confirm Q3 2021 Share Price Forecast
Technically, Affirm shares appear to have risen recently, creating an upward price differential in the intraday chart. As a result, the stock has now rallied to the overbought conditions of the 14-day RSI. However, the upside potential created by the deal with Amazon could push stocks further amid heightened investor optimism.
Therefore, investors might aim for extended gains to around $ 110.53 or more at $ 120.11. On the other hand, if the stock pulls back under overbought conditions, it could find support at $ 89.82 or less at $ 78.85.
Conclusion: the case for buying the AFRM bull run
In summary, while AFRM stock appears to be significantly overvalued, current earnings projections did not take into account its deal with Amazon. Therefore, once analysts revise their estimates after Friday’s announcement, the stock’s valuation may look more reasonable.
Therefore, it may not be too late to buy Affirm shares, even if the stock is reaching overbought conditions.
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