As someone who was optimistic Confirm (NASDAQ:AFRM) share already in February of last year, I was annoyed by the recent price movements. Seeing all of those gains wiped out reminded me of the volatility inherent in these growth stocks.

However, as Warren Buffett always says, “be greedy when others are fearful.” And oh boy, has there been panic in the market lately.

Rising interest rates have a negative effect confirm

Despite my optimism for the company over the long term, there’s no doubt that the next few weeks will continue to be tough for Affirm. In a note to clients, Morgan Stanley analyst James Faucette believes payments stocks like Affirm “have a long way to go before the market is convinced again.”

He cites the slow recovery of international tourism, a lack of capital inflows and volatile interest rates as key macroeconomic concerns. In particular, he notes that the rapid change in implied interest rates improves Affirm’s performance compared to traditional payment processors such as PayPal. B. can affect Visas (NYSE:v) and MasterCard (NYSE:MA).

This is because the buy-now-pay-later business model has a much more direct interest rate risk. Remember how Affirm works is that it charges a fixed rate calculated over a series of predefined payments. Clients are never charged compound interest, late fees or penalties for the loans.

The rise in interest rates can negatively affect Affirm in two ways. The first is that the increased rates can reduce customers’ spending. Higher fixed interest rates mean higher payment obligations, so customers may have concerns about spending that amount of money.

Higher variable interest rates could also negatively impact Affirm. The increase in variable interest rates reduces the company’s margin on its fixed-rate charges. As in the risk section in the 10-K.

“Given the fixed interest rates charged on the loans originated on our platform, should floating interest rates increase across the market, the interest margin we have earned on these financing arrangements would decrease. Dramatic rate hikes can make these forms of financing unprofitable.”

Long-term growth is preserved

Despite the difficult macroeconomic environment, the future continues to look bright. The company’s stock had fallen like a knife since its all-time highs in November last year. AFRM stock has since lost around 65% of its value. This result was not too surprising as AFRM stock traded at high valuations despite the promising growth story.

Investors in AFRM stocks finally got a little respite from the non-stop bleeding this Friday. Investment firm DA Davidson upgrades AFRM stock to buy from neutral with a price target of $75.

At current price levels, the stock is trading at a much more attractive valuation given its growth prospects. According to a statement from the investment bank, “buy now, pay later” rates in the US more than doubled this holiday season.

This proves that customers are extremely receptive to Affirm’s business model. The fact that the company Amazon’s (NASDAQ:AMZN) Buy now, pay later providers also increased their results.

your snack

Investors should consider following DA Davidson’s buy recommendation. The company’s target price implies a 25% upside from the current price level.

AFRM stock is trading at such a deep discount that even longtime shareholders at these levels should be considering cost averaging. Dollar cost averaging is a good alternative to market “timing” and will lower the average cost of the stocks in the portfolio. This will result in much larger gains when the stock finally recovers.

The difficulties Affirm faces are largely caused by inflation and the current macroeconomic environment. The company itself is executing well on its growth plans and is running on all cylinders. Therefore, on positive news, AFRM stock should recover from its current low levels. I believe the current price level represents an attractive buying range for AFRM stock.

on the day of publication, Joseph Nograles had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publicity guidelines.

Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a variety of industries from technology to consulting at one of the “Big Four”. He has always enjoyed analyzing companies and was a CFA charterer for almost a decade.