Morgan Stanley has upgraded Affirm to Overweight, viewing the recent selloff as an attractive entry point. Shares in the buy now, pay later firm have dipped over 20% in the past month. MS believes growth and credit concerns are likely short-lived. The firm’s price target has been adjusted to $76 from $83 due to peer valuation compression.

The downgrade follows concerns about slowing growth and potential consumer weakness. However, MS anticipates Affirm can still exceed consensus expectations, supported by internal data on web traffic and app usage. They also see no signs of borrower deterioration, and upcoming tax refunds could support consumer spending. BNPL continues to gain share within e-commerce.

Affirm's merchant-funded 0% APR promotions offer a key differentiator. Lower interest rates should improve unit economics, reducing funding costs. Partnerships with FIS and Fiserv are also expected to provide upside. MS's positive outlook suggests confidence in Affirm's long-term positioning. This upgrade could signal a turning point for the stock.

Investors should watch Affirm's next earnings report for further details. Continued growth in the BNPL sector is likely, and Affirm hopes to be a key player. The company’s ability to maintain its competitive edge and manage risk will be critical. Any changes to consumer spending habits will also be important.