(Bloomberg) -- Buy-now, pay-later company Affirm Holdings Inc. was one of 2023’s biggest stock market winners, surging over 400%. Most of Wall Street isn’t bullish on its prospects. 

One outlier is Mizuho analyst Dan Dolev, who has named Affirm as a top pick and set a Street-high price target of $65, according to data compiled by Bloomberg. That implies a gain of about 55% from current levels.

The company, which competes with financial services payments and lending firms such as Paypal Holdings Inc. and Block Inc., is “growing up and becoming a full-fledged financial services provider,” Dolev said in an interview. He sees its new physical card product expanding it into brick and mortar retail in addition to e-commerce, boosting its total addressable market to $7 trillion from $1 trillion. 

“That’s kind of the next big thing that’s not priced into the stock,” he said.  

Wall Street analysts watching Affirm, which also competes with more traditional companies like Mastercard Inc. and Visa Inc, have widely different expectations for the stock in the coming months. 

Among the 23 analysts covering the company, just five recommend buying the shares, 12 say to hold and six say sell. The average price target is about 24% below where shares are trading Tuesday morning in New York and the range is unusually wide, from Dolev’s $65 to the Street-low $6 target set by Vincent Caintic of Stephens Inc. 

Some of Wall Street’s reluctance to get behind Affirm might stem from its massive drop in 2022, when the stock lost more than 90% of its value in a broad-based slump in equities. Now the big question is whether its valuation at about six times sales is appropriate after last year’s run up. The average in the Nasdaq 100 is less than five times. 

While its “fundamentals have been strong and credit quality continues to outperform peers, we believe Affirm’s valuation could be stretched,” Wedbush Securities Inc. analysts including David Chiaverini wrote in a Tuesday note. They have an underperform rating and $20 price on shares. 

Bears argue that in the event of a recession, a weaker consumer could be a blow to Affirm and potentially weigh on earnings and its path to profitability. 

The bulk of the 2023 rally came in the last few months of the year when hopes of a Federal Reserve pivot and lower US Treasury yields fueled a risk-on trade. That’s since been muddied by last week’s stubborn inflation reading and signs central banks are in no rush to cut rates. Shares of Affirm have slipped more than 14% since the start of the year. 

Larger, more established payment names such as Visa or Mastercard may be more attractive to investors looking for less risk, according to David Klink, senior equity analyst at Huntington Private Bank.

Still, if the Fed does nail a soft landing and starts to loosen monetary policy this year, it bolsters the bull thesis for Affirm.

“With interest rate cuts in the year ahead and more retailers signing up for Affirm’s BNPL offerings, fears of a doomsday scenario for the company have faded,” Christian Magoon, chief executive officer of Amplify ETFs, said in an email, referring to buy now pay later. Affirm is the top holding in the Amplify Online Retail ETF.

“Ultimately Affirm will be sensitive to consumer behavior and needs to ideally straddle a dynamic where consumers value a buy-now, pay-later option but aren’t using it on a path to eventually default on the obligation,” said Magoon.  

Tech Chart of the Day

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--With assistance from Ryan Vlastelica.

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