Affirm upped to Equalweight at Morgan Stanley as it attracts higher income users

Morgan Stanley upgraded Affirm Holdings (NASDAQ:AFRM) to Equalweight from Underweight as analyst James Faucette expects the company’s better distribution, promotion, and pricing to attract higher income consumers.

Affirm (AFRM) stock gained 3.6% in Wednesday premarket trading.

“We’re stepping to the sidelines as more compelling offers for higher income spenders coupled with lower regulatory risk likely improves future earnings potential, especially as the company continues to develop sustainable underwriting & customer engagement capabilities,” the analyst wrote in a note to clients.

The availability of Affirm (AFRM) financing through Apple Pay has increased its potential exposure to that product’s generally younger and higher income demographics. Its use of 0% offers should increase engagement with merchants and manufacturers. And lower interest rates should lead to more promotional rates, the analyst said.

He sees regulatory burdens easing in the near term. In late August CFPB director Rohit Chopra said the BNPL industry “is responding favorably and constructively” to its interpretive ruling issued in May, Faucette pointed out.

Faucette’s Equalweight rating on AFRM contrasts with the SA Quant rating of Strong Buy and the average SA Analyst rating of Buy and aligns with the average Wall Street rating of Hold.