Affirm (AFRM) Stock Jumps 5% After Launching AI Model for Loan Approvals

TLDR

• Affirm stock rose 5.5% in premarket trading Thursday after announcing a new transformer-based AI model for real-time loan decisions
• The model is now live at checkout in the U.S. and uses 14 years of transaction-level underwriting data
• In testing, the AI approved more eligible applicants and produced 3.4% more completed purchases versus a control group
• Affirm’s CAO Siphelele Jiyane sold roughly $1.95 million worth of stock on September 14th, reducing his stake by 12.51%
• Wall Street holds a “Moderate Buy” consensus on AFRM with an average price target of $98.78, well above its recent price of $71.58

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Affirm Holdings (AFRM) jumped 5.5% in premarket trading Thursday after the buy now, pay later company unveiled a new transformer-based AI model designed to make faster and more accurate loan decisions at checkout.

The stock had been trading around $71.58 heading into the announcement, well below the average analyst price target of $98.78.

Affirm Holdings, Inc., AFRM

The new model is already live in the U.S. and draws on 14 years of Affirm’s own transaction-level underwriting data. It uses machine learning to analyze the order and timing of events in a consumer’s credit history, a step up from the company’s previous approach.

One of the more interesting aspects of the model is how it handles thin-file borrowers. Affirm said the AI approved additional applicants that its older system would have turned down, including people with limited credit histories and no FICO scores.

Stronger Results With Less Risk

In its initial rollout, the model produced 3.4% more completed purchases compared to a control group. Affirm also said those extra loans performed better than a comparable expansion run under its previous machine learning models, suggesting the AI is picking better risks, not just more of them.

Libor Michalek, Affirm’s President, said the transformer architecture allows the company to extract new information from data it already has. “Seeing a credit history more clearly means we can responsibly say yes to more people,” he said.

The model identifies patterns within and across credit accounts, tracking how those patterns shift over time. Affirm built a proprietary algorithm to keep the model explainable while still fast enough to run in real time at checkout.

Affirm was clear that the goal is not to approve every application. The company said extending credit to people who cannot repay it does not benefit the business.

Insider Selling Draws Some Attention

Not everything is pointing upward. CAO Siphelele Jiyane sold 26,980 shares on September 14th at an average price of $72.19, bringing in roughly $1.95 million. That sale reduced his ownership in the company by 12.51%, leaving him with 188,711 shares.

Jiyane had also sold 25,000 shares on September 4th at $72.41. The back-to-back sales will likely draw some scrutiny, even if insider selling does not always signal a negative outlook.

On the earnings front, Affirm reported $4.62 EPS in its most recent quarter, crushing the $0.35 consensus estimate. Revenue came in at $1.07 billion, up 33.1% year over year, though slightly below the $1.11 billion estimate.

Analysts have responded positively overall. Piper Sandler raised its price target from $103 to $115 with an overweight rating. BMO Capital Markets and Citigroup both reiterated outperform ratings.

Of the 32 analysts covering the stock, 24 rate it a Buy and 8 a Hold.

Affirm’s 50-day moving average sits at $75.43, with a 200-day moving average of $66.39.