Affirm shares edge higher premarket after Jefferies upgrades rating to "hold"

Investing.com -- Shares in Affirm (NASDAQ:AFRM) gained in premarket U.S. trading on Tuesday after analysts at Jefferies improved their rating of the fintech group.

In a note to clients upgrading their outlook for Affirm to "hold" from "underperform," the Jefferies analysts cited recent evidence of "stabilizing" credit risk, arguing that the trend illustrates the "structural benefits of [Affirm's] product positioning." They added that momentum in adoption rates of so-called "buy now, pay later" services is being driven by current inflationary and macroeconomic pressures.

Affirm offers its customers the chance to purchase items and pay for them at a later date, typically without charging interest. The flexibility has made the option increasingly popular among online shoppers, although officials at the Consumer Financial Protection Bureau have warned that these borrowers are more likely to carry high debt loads or have credit card delinquencies.

This week, Cyber Monday spending rose to record levels due in large part to many retailers utilizing the buy now, pay later option, according to analytics firm Adobe (NASDAQ:ADBE) Digital Insights. The short-term financing helped to alleviate some stress on U.S. consumers squeezed by inflation and elevated interest rates heading into the key holiday shopping season, Adobe said.

"It is likely that [buy now, pay later] adoption continues, with [Affirm] benefiting from close brand association with the product," the Jefferies analysts said.