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Affirm (NASDAQ:AFRM) stock enjoyed a strong late-day push after Goldman Sachs initiated coverage on the buy-now pay-later company with a “buy” rating. Indeed, Goldman Sachs analysts were clearly impressed by Affirm’s business model, setting a price target of $42 on AFRM stock. That implies roughly 25% upside from the stock’s closing price of $33.70 per share.

Why is Goldman Sachs so big on Affirm?

Well, according to the firm, Affirm’s strength lies in its portfolio and underwriting. Indeed, analysts pointed out that Affirm has “a diverse portfolio of products for point of sale financing, and every day spending,” per Investopedia. Because of its strong loan underwriting, the company is also able to tap into subprime and near-prime borrowers, which provides a notable competitive advantage.

Analysts were also impressed with the loan service business, noting that Affirm has a “strong track record of achieving well managed credit outcomes despite growing faster than peers.”

Finally, Goldman cited Affirm’s growing demand for its buy-now pay-later and Pay-in-4 payment options. Analysts noted that all of the choices “should drive strong market share gains” and help the company become “one of the first new closed-loop platforms in the payments ecosystem.”

AFRM Stock Climbs on Goldman Advocation

AFRM stock closed up by almost 13% today. Unfortunately, though, shares are still well in the red for the year, down almost 28% year-to-date (YTD) while the S&P 500 is up roughly 15% over the same period.

Affirm stock has struggled to build any momentum this year. Recently, shares fell after Apple (NASDAQ:AAPL) announced that it would no longer offer its Apple Pay Later feature. Still, some speculate the change may open the door for Affirm’s integration into Apple’s iOS.

Investors will surely be keeping a closer eye on this financial services company following Goldman’s brow-raising review.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.