Digital finance companies Affirm Holdings and SoFi Technologies will be share gainers in the consumer market, says a William Blair analyst who initiated coverage of the companies on Wednesday with outperform ratings. Affirm stock and SoFi stock rose on the news.
"Consumer finance and bank cards will gain momentum as younger demographics seek better, more transparent financial experiences," said William Blair Andrew Jeffrey analyst in a report.
"The best digital finance providers offer superior user experiences and more innovative financial products, compared with traditional banks," he added. "They also employ proprietary underwriting algorithms, enabling real-time credit decisions."
Affirm provides buy-now pay-later services. With BNPL options, consumers pay off purchases in monthly or biweekly installments, either with low interest or none at all. The Affirm debit card links to consumer checking accounts at banks or Affirm's Money Account. It allows consumers to pay for purchases right away or request to pay for purchases over time.
SoFi, a digital bank, provides personal, college student, mortgage, and credit card loans. Both companies are based in San Francisco.
Affirm Stock: Technical Ratings
"Although Affirm and SoFi have yet to navigate a traditional consumer credit cycle, they operated through Covid and have proved their ability to adjust risk in different macro environments," Jeffrey added. "In addition, Affirm and SoFi have demonstrated consistent access to liquidity via secondary funding markets, FDIC-insured deposits, and guaranteed financing from third-party and platform lenders. We believe consistent liquidity and ample capital indicate that investors' long-tail risk fears are overblown."
On the stock market today, Affirm stock climbed more than 5% to 58.44. SoFi stock rose more than 3% to 15.04.
Affirm stock holds a Relative Strength Rating of 93 out of a best-possible 99, IBD Digital shows. Affirm stock also has a Composite Rating of 84, a measure of fundamental and technical metrics.
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