- MoffettNathanson analyst Eugene Simuni rolled out coverage of six stocks in the Fintech sector.
- Simuni initiated coverage of Toast Inc (NYSE:TOST) with a Sell rating and $19 price target (10.2% downside) and Affirm Holdings Inc (NASDAQ:AFRM) with a Neutral rating and $50 price target (14.1% upside).
- He thinks that Toast and Affirm are two Fintech disruptors whose longer-term growth trajectories are likely to disappoint compared to the anticipations indicated in current valuations.
- Toast faces a challenging competitive environment from other "buy now, pay later" (BNPL) providers, which is likely to create "downward pressure" on its profit yield.
- Other headwinds include the potential of higher financing costs and deterioration in the U.S. credit environment.
- While Affirm is a leader in the U.S. BNPL market, the niche value proposition of BNPL services and rapidly compressing yields restricted its growth runway.
- Meanwhile, the analyst noted that digital banks continue to capture market share from traditional financial service providers, like banks and credit unions that are struggling to keep up with technology demands.
- Price Action: TOST shares closed lower by 11.9% at $21.19, and AFRM lower by 8.09% at $43.84 on Tuesday.
