Upstart's AI lending model faces toughest test if rates stay high

Goldman Sachs raised its price target on Affirm Holdings to $115 from $106 on September 12, citing improving underlying fundamentals. The hike followed Affirm's fourth-quarter fiscal 2026 results, in which revenues surged 33% to $1.2 billion and operating income rose $89 million to $147 million. Interest income climbed 35% in the quarter, in line with a 33% increase in average net loans held for investment partners, and 80% of Affirm's direct-to-consumer product loans carried interest at quarter-end. Affirm Card active cardholders more than doubled to 5.2 million, driving a 124% increase in Card GMV to $2.8 billion, while management estimated GMV would reach $64 billion in fiscal 2027 with an adjusted operating margin of 30.5%. Wolfe Research analyst Darrin Peller upgraded the stock to Outperform with a $90 price target, though the company continues to face credit-quality and competitive risks as banks, fintechs, retailers and payment networks expand installment-payment offerings.

Affirm Holdings is launching a new transformer-based machine learning model for real-time credit underwriting at U.S. checkouts, drawing on 14 years of its own transaction and repayment data to analyze the order and timing of events across a consumer's credit history. In initial testing, the model approved applications the previous system would have declined, including consumers with limited credit histories and no FICO scores, and those incremental approvals produced 3.4% more completed purchases than the control group, with the loans performing better than a comparable expansion under the previous model. Affirm says the model is built to deliver fast and explainable decisions, and the release does not provide a dollar estimate of the financial impact. The company frames the launch as expanding approvals without simply lowering credit standards, with the financial benefit depending on how the early results scale. Affirm shares have risen 58.2% over the past six months compared with the industry's 20.2% growth, and the stock trades at a forward price-to-sales ratio of 4.1X versus the industry average of 4.2X.