Needham & Company moved Affirm's rating to Buy from Hold in a research note published Tuesday, pointing to the company's application for a banking charter as a possible inflection point for its business model and profitability.
The analyst leading the coverage, Kyle Peterson, characterized the decision to pursue a bank license as something that "could be a game-changer for AFRM" and said it gives the firm "incremental confidence in the durability of the growth outlook." Needham established a $100 price target for Affirm shares.
Affirm has filed applications with the Nevada Financial Institutions Division and the Federal Deposit Insurance Corp. to create Affirm Bank, an industrial loan company that would be run as an independent subsidiary. The proposed bank would be overseen by John Marion, whom the note describes as a veteran banking executive with prior roles at JPMorgan Chase, MVB Financial and Comenity Bank.
Needham's analysis emphasizes funding cost dynamics as the principal financial lever. The firm said that Affirm's existing warehouse and securitisation funding lines carry "costs of 5-8%," while FDIC-insured deposits would be closer to "3-4%." According to Needham's estimates, a full shift to deposit funding could be "35%+ accretive to GAAP EPS," and the firm labeled deposits the "stickiest source of funding available."
Beyond funding, Needham highlighted potential operational and product advantages from an in-house banking capability. Bringing the Affirm Card and the Affirm Money Account under the bank umbrella could streamline the user experience and align financial flows, which the firm believes "could reduce friction with users and improve unit economics," creating a medium-term tailwind for the business.
Peterson also wrote that "the deregulation push by the current administration makes approval likely," a point the note used to support the prospect that the licensing effort will succeed, though that outcome is not guaranteed by the filing itself.
Contextual note: The upgrade centers on two core areas - lower ongoing funding costs if deposits replace higher-cost warehouse and securitisation lines, and potential product and unit-economics improvements if certain offerings are internalised within a bank subsidiary.