AFRM's Price is Dropping - What's going on?

Tumbling to a price of $24.57 during today's afternoon trading session, shares of Affirm Holdings, Inc. are now -32.24% below their average target price of $36.26. Does this mean the stock will reverse course? Analysts are giving AFRM an average rating of hold and target prices ranging from $15 to $80 dollars per share.

With a short interest of 18.8%, we can infer that the market sentiment on Affirm Holdings, Inc. is negative. Each short position represents an investor's expectation and hope that the stock's price will reverse its present course and start falling.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Affirm Holdings, Inc., institutional investors own 84.5% of the shares, which indicates they have a very high stake in the company. What does this really tell us?

Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in AFRM, it probably means they believe it is a solid investment choice.

But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.

Reviewing the analyst coverage of a stock as well its short and institutional ownership percentages gives a glimpse of what the current market sentiment is on Affirm Holdings, Inc.. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.

At a glance, here are some essential statistics you may want to know about AFRM:

  • It has a trailing 12 month price to earnings (Eps) of $-2.29 per share

  • Affirm Holdings, Inc. has a trailing 12 month Price to Earnings (P/E) ratio of -10.7 while the S&P 500 average is 15.97

  • The company has a Price to Book (P/B) ratio of 2.7 in contrast to the S&P 500's average ratio of 2.95

  • Affirm Holdings, Inc. is a Technology company, and the sector average P/E and P/B ratios are 20.64 and 5.39 respectively

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.