On Monday, Affirm Holdings Inc. (NASDAQ:AFRM) shares spiked more than 45% following Friday’s deal announcement with Amazon.com Inc. (NASDAQ:AMZN). The company’s popular “buy now, pay later†feature will now be available on Amazon allowing shoppers 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 lending market.
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Affirm shares are now up more than 75% this month. However, the recent spike has only helped AFRM to swing to just 1% gains year-to-date after plunging more than 65% between February and May.
So should you buy Affirm shares in September 2021?
From a valuation perspective, Affirm shares trade at a steep price-sales ratio of about 26.38, making the stock less attractive to value investors. However, investors expect AFRM earnings per share to grow by a whopping 58.80% next year, meaning growth investors could find it compelling.
Moreover, current analyst estimates did not factor in last week’s deal announcement with Amazon. Amazon has more than 300 million customers. As a result, Affirm will have access to one of the largest marketplaces in the world, thereby boosting its growth potential.
Therefore, although Affirm shares spiked more than 45% on Monday, the stock has more room to run in the coming quarters.
Technical overview: Affirm stock price predictions for Q3 2021
Technically, Affirm shares seem to have recently spiked, creating an upward price gap in the intraday chart. As a result, the stock has now rallied to overbought conditions of the 14-day RSI. However, the upside potential created by the Amazon deal could still drive shares higher amid increased investor optimism.
Therefore, investors could target extended gains at approximately $110.53 or higher to $120.11. On the other hand, if the stock pulls back amid hitting overbought conditions, it could find support at $89.82 or lower at $78.85.
Bottom line: the case for buying the AFRM bull run
In summary, although the AFRM stock seems substantially overvalued, current earnings projections did not factor in its deal with Amazon. Therefore, once analysts revise their estimates following Friday’s announcement, the stock valuation could look more reasonable.
Therefore, it may not be too late to buy Affirm shares, despite the stock hitting overbought conditions.
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