Why Goldman Sachs rates Afterpay shares as a buy

The Afterpay Touch Group Ltd (ASX:APT) share price is on the Goldman Sachs conviction buy list. Here's why…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In morning trade the Afterpay Touch Group Ltd (ASX: APT) share price is up 0.5% to $15.32.

This small gain has stretched the payments company's 12-month gain to a whopping 97%.

Is it too late to buy Afterpay shares?

According to one leading broker, it isn't too late to buy shares.

A note out of Goldman Sachs reveals that its analysts have a conviction buy rating and $19.25 price target on the company's shares.

This price target implies potential upside of almost 26% for its shares over the next 12 months.

Why does Goldman rate Afterpay as a buy?

As well as being impressed with its performance so far in FY 2019, there are a number of reasons that Goldman is bullish on Afterpay.

One is its belief that company has a massive opportunity in the U.S. market. It has previously noted that the: "population size difference between the two countries is such that the addressable population in the US is almost 13x bigger, the online Apparel and Footwear market is 14x bigger and the instore opportunity is around 15x than the Australian market."

It also sees a lucrative opportunity in the UK market. It has previously forecast the company being almost breakeven in the UK in FY 2020 and then generating $33 million in EBTDA there in FY 2021.

Another often overlooked reason to be positive is the repository of transaction data that the company is accumulating.

Goldman believes that this data has the potential to create value in two important ways. One is by rapidly improving its credit assessment platform and the other is the potential for it to be used to develop value add services in the future.

Should you invest?

While Afterpay Touch is certainly a high risk option, I agree with Goldman and believe it could be a great long-term investment along with fellow tech stars Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Growth Shares

happy investor, share price rise, increase, up
Growth Shares

2 top ASX growth shares for explosive potential in 2025

These stocks look exciting and compelling to me.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Share Market News

Brokers say these ASX 200 growth stocks could rise 50% to 70%

Analysts think these shares could be dirt cheap and destined to generate big returns.

Read more »

happy investor, share price rise, increase, up
Growth Shares

3 fantastic ASX 200 growth shares to buy in 2025

Analysts have good things to say about these buy-rated shares.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Growth Shares

The ASX 200 stock with 'a $200 billion gross profit opportunity'

Experts believe this stock has excellent potential.

Read more »

A young girl and boy drinking milk in a garden setting
Growth Shares

2 ASX growth shares set to skyrocket in the next 12 months

These stocks have a lot of potential according to experts.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Growth Shares

2 no-brainer ASX 200 shares to consider buying with just $1,000

Analysts rate these top stocks very highly. Let's find out why.

Read more »

A happy laughing surfer couple surfing together.
Growth Shares

If I were in my 20s, I'd buy these ASX shares for growth

I think these investments could be great picks for younger Aussies.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Growth Shares

Invest $5,000 into these ASX 200 shares in 2025

Analysts think these shares could be top options for an investment in 2025.

Read more »