Stocks ticked higher in early trading this morning to kick off the last full week of trading in May. It’s been a bumpy ride this month, but the ‘buy the dip’ mentality has been particularly strong. Cruise, airline and other stocks that stand to benefit from the economic reopening stocks caught a bid this morning. Tech stocks, which have been hit especially hard as of late, were also higher in early trading. Cryptocurrencies snapped back too this morning after a sharp weekend sell-off sent Bitcoin below $32,000.
Stocks have been choppily trading in range for weeks, and that may not be over yet, but many analysts see this stall as healthy. Tom Lee, head of research at Fundstrat Global Advisors recently noted, “We continue to see incremental data points that strengthen our view that when equities break out of this range, the next move is a substantial rise higher.”
Financial stocks have been in the limelight this year. The Financial Sector SPDR ETF (XLF) has outperformed the broader market, with a total return of more than 20% year-to-date compared to the SPDR S&P 500 ETF Trust (SPY). Our trade alert for today highlights what some are calling the next financial stock to shake up the industry.
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Affirm Holdings (AFRM) is an emerging fintech company that is best known for their buy now, pay later (BNPL) solution for retailers and shoppers. As one of the top three players globally in the BNPL space, they believe they can reinvent the payment experience. The stock has been in free fall since it’s $139 February peak, partly due to investor sentiment. But there are also some fundamental concerns that could be deterring investors.
From its third-quarter results, revenue came in 67% higher and gross merchandise came in 83% higher. While these numbers are impressive, the company also increased its net loss from $85 million in fiscal Q3 2020 to $247 million in fiscal Q3 2021.
The core of Affirm’s business is loaning money to customers to make purchases, but the depth of credit checks involved is probably much less than what traditional banks do for credit card applications, which means that Affirm’s default risk is likely higher. It could be just a matter of time before the framework of BNPL practices improve.
If you believe that BNPL will become a regular fixture in fintech like Max Levchin, PayPal co-founder and creator of Affirm, than you may be considering a positon in AFRM, which is possibly the best pure play on BNPL available.
Of 8 analysts covering the stock, 4 recommend to Buy AFRM and 4 call it a Hold. There are no Sell ratings. An average price target of $76.88 points towards a 44% increase from its current price, which is around $53.
Where to invest $1,000 right now...
Before you consider buying Affirm, you'll want to see this.
Investing legend, Keith Kohl just revealed his #1 stock for 2022...
And it's not Affirm.
Jeff Bezos, Peter Thiel, and the Rockefellers are betting a colossal nine figures on this tiny company that trades publicly for $5.
Keith say’s he thinks investors will be able to turn a small $50 stake into $150,000.
Find that to be extraordinary?
But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.
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