It certainly was a great day for shareholders of Afterpay Touch Group Ltd (ASX: APT).
The Afterpay Touch share price was one of the biggest movers on Thursday and rose almost 8% to close at an all-time high of $9.08.
This means that the payment solutions company's shares have now risen by over 52% since the start of the year.
Is it too late to invest in the fintech star?
While I don't think it is too late to invest in Afterpay Touch shares, I do think its current valuation makes it a high-risk investment option that would be largely unsuitable for many investors.
As I mentioned a couple of months ago, Goldman Sachs put a $6.30 price target on the company's shares. $4.80 of this valuation was attributed to its Australian business, with the remaining $1.50 attributed to its U.S. operations.
I felt the broker's valuation of the Australian operations was fair given signs that the business was maturing sooner than expected during the last quarter. Based on this valuation, investors are now valuing its U.S. business at $4.28 per share.
Given the size of the U.S. opportunity this doesn't come as a big surprise. The U.S. online fashion market, for example, is 20 times bigger than its Australian equivalent. Furthermore, one of its early partners in the United States, Urban Outfitters, currently generates sales of US$3 billion, which is roughly the same size as the entire Australian online fashion market.
The sky really could be the limit if Afterpay Touch can replicate its Australian success in the United States.
But if it fails to succeed in the U.S. I fear there is a real danger that its share price could collapse down towards the $4.80 mark. That would mean a decline of almost 50% from where it stands today.
So while I am bullish on Afterpay Touch and think it could be a great long-term investment, it really does depend entirely on the company succeeding in the United States. As such, investors should take this into account before making an investment.
Elsewhere in the fintech industry I think Bravura Solutions Ltd (ASX: BVS) and Hub24 Ltd (ASX: HUB) could be worth a closer look.
