Sell AFRM Stock At $85?

Core Insights - Affirm Holdings has experienced a significant 40% year-to-date surge, raising questions about its current valuation and attractiveness as an investment opportunity [2] - Despite strong operational and financial performance, the company's current valuation appears high compared to historical averages and the broader market [3][10] Financial Performance - Affirm's revenues have grown substantially, with a 38.8% increase from $2.3 billion to $3.2 billion over the last 12 months, compared to a 5.1% growth for the S&P 500 [7] - The company has an average revenue growth rate of 34.3% over the last three years, significantly outpacing the S&P 500's 5.3% [7] - Quarterly revenues increased by 33.0% to $876 million from $659 million year-over-year, while the S&P 500 saw a 6.1% improvement [7] Valuation Metrics - Affirm's price-to-sales (P/S) ratio stands at 9.0, compared to 3.3 for the S&P 500, indicating a higher valuation [7] - The price-to-free cash flow (P/FCF) ratio is 48.1, significantly higher than the S&P 500's 21.4 [7] - The current valuation of 9.4 times trailing revenue is above its three-year average P/S ratio of 8.9, suggesting limited upside potential in the near term [10] Profitability and Financial Stability - Affirm's operating income over the last four quarters was $338 million, resulting in an operating margin of 10.5%, lower than the S&P 500's 18.6% [13] - The operating cash flow (OCF) was $794 million, yielding a high OCF margin of 24.6%, above the S&P 500's 20.2% [13] - The company's net income was $52 million, reflecting a net income margin of 1.6%, which is significantly lower than the S&P 500's 12.7% [13] - Affirm's debt stands at $7.9 billion, with a market capitalization of $29 billion, resulting in a debt-to-equity ratio of 27.1%, higher than the S&P 500's 20.3% [13] Downturn Resilience - Affirm's stock has shown weak resilience during downturns, having fallen 94.7% from a high of $168.52 in November 2021 to $8.91 in December 2022, compared to a 25.4% decline for the S&P 500 [14] - The stock has not yet recovered to its pre-crisis high, with a recent peak of $88.46 on September 1, 2025 [14] Overall Assessment - Affirm is characterized by very strong growth, moderate profitability, strong financial stability, and weak downturn resilience, leading to an overall strong assessment [14]