Morgan Stanley has upgraded Affirm Holdings Inc. (AFRM), a leading payment network operator in the U.S. and Canada, to Equal-Weight from Underweight. This upgrade comes on the heels of Affirm’s strategic shift to target higher-income users. The investment firm, which had previously expressed concerns about Affirm’s growing reliance on lower-income customers, is now optimistic about the company’s future due to its successful integration with Apple Pay. This partnership has significantly expanded Affirm’s reach to a younger, more affluent demographic.
Morgan Stanley predicts that the Apple Pay integration will generate an additional $1.94 billion in transaction volume by fiscal year 2026, surpassing previous estimates of $1.0-1.5 billion. The firm is particularly encouraged by Affirm’s efforts to enhance direct sales engagement with manufacturers and merchants, believing it will drive an increase in promotional financing offers throughout 2025.
Higher-income consumers often respond favorably to promotional interest rates, and Affirm’s move to offer a wider range of promotional rates, including options beyond 0% (such as 1.99% or 4.99%), is anticipated to further increase its appeal to this key demographic. By combining improved distribution and promotional strategies with a lower cost of capital, Affirm is well-positioned to capture a greater share of the higher-income consumer market.
While Affirm faces competition from established players like PayPal and Apple, Morgan Stanley believes that increasing brand awareness and its unique proposition as a Buy Now, Pay Later (BNPL) provider will narrow the trust gap among younger consumers.
Affirm’s stock price has risen 4.34% to $42.94 at the close of trading Wednesday. This upward movement in the stock price is likely a reflection of investor confidence in Affirm’s growth strategy.
