Affirm Shares Surge on Strong Growth, But One-Time Item Inflates Earnings Beat

Shares of Affirm Holdings (AFRM) jumped more than 9% after the buy now, pay later firm posted strong fiscal fourth-quarter results and offered an upbeat forecast. While the company's operational growth remained robust, its headline earnings-per-share figure was significantly inflated by a one-time accounting adjustment.

Results Driven by Growth and a Tax Benefit

Affirm reported its fiscal Q4 2026 results on August 27, demonstrating continued momentum in its core business. The key operational metrics highlighted strong consumer adoption and engagement:

• Revenue: $1.17 billion, surpassing the consensus estimate of $1.11 billion.
• Gross Merchandise Volume (GMV): Reached $14.1 billion, a 36% increase year-over-year, marking the 11th consecutive quarter of over 30% growth.
• Active Consumers: Grew by 21% to 27.8 million.

However, the company's reported earnings per share of $4.62—a 444% surprise over the expected $0.85—was primarily driven by the release of a valuation allowance on its deferred tax assets, according to the source report. This is a non-recurring accounting event that does not reflect the company's core operational profitability.

Upbeat Guidance and Wall Street Upgrades

Ad

Looking ahead, Affirm's management provided a strong outlook for fiscal year 2027, projecting GMV to exceed $64 billion. This forecast implies growth of at least 27% and was described as "conservative" by analysts at Bank of America, as it does not include potential contributions from new initiatives like a potential bank charter or UK expansion.

Following the report, several Wall Street firms raised their price targets on Affirm's stock. Analysts at Piper Sandler increased their target to $115, while Bank of America lifted its target to $104, reflecting confidence in the company's growth trajectory.

Valuation in Focus

The strong stock performance has pushed Affirm's valuation into the spotlight. Following the report, shares traded at $84.54, which an InvestingPro fair value model cited in the source material suggests is 20.7% overvalued compared to its estimate of $67.04.

The stock's forward price-to-earnings ratio stands at a more realistic 21.4x, accounting for the one-time nature of the recent earnings beat. This creates a divergence between quantitative models suggesting caution and analyst consensus, which sees further upside based on future growth prospects.