What happened
The stock market was having a generally strong day on Friday, with all three major averages in the green, led by the tech-heavy Nasdaq. However, buy-now-pay-later (BNPL) company Affirm (AFRM 2.66%) was a big outperformer, with shares up by about 14% for the day as of 12:45 p.m. EST.
So what
There are a couple of reasons Affirm is such an outperformer today. First is the overall market momentum. Growth stocks, in general, have been beaten down recently, and they're getting the biggest benefit from today's positive move, so at least some of Affirm's pop is just due to a strong day for growth stocks.
Image source: Getty Images.
Second, an analyst at DA Davidson upgraded Affirm from neutral to buy and put a $75 price target on the stock. This implies about 30% upside, even after today's move. Analyst Christopher Brendler said in his note that the sell-off in Affirm has greatly improved the risk/reward dynamics of the stock.
Now what
While we take analyst opinions on any stock with a big grain of salt, it's not difficult to see why such a bullish call could cause the fintech stock to rebound, especially after the recent slump. Even after today's rally, Affirm has still lost about two-thirds of its value since peaking at more than $176.
Recent data suggests that BNPL usage grew dramatically during the holiday season. With the stock set to report earnings on Feb. 10, we'll get a better idea of how the underlying business is performing then. If the company's numbers impress investors, there could be more upside ahead.
