Why Afterpay shares gained 14% this week

At $33 it trades on 46x Goldman's estimates for 71 cents in earnings per share for the year ending June 30 2022.

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

Afterpay Touch Group Ltd (ASX: APT) shares are surging again today after the buy-now-pay-later specialist held a positive trading update this week.

Afterpay reported it added 15,000 customers per day over the month of October as it continues to grow at a breakneck pace in Australia, the US and UK. In total it now has nearly 40,000 retailers offering its platform to shoppers.

According to to its latest regulatory filing dated October 31 2019 the group has 252.7 million shares on issue to give it a market value around $8.34 billion based on a $33 share price.

In addition on November 13 it announced it will place $200 million worth of shares at $28.50 each to a private U.S. tech investor to take the market value closer to $8.5 billion post-placement. 

Despite the high valuation for a business yet to post a profit brokers are generally enthusiastic about Afterpay, with both Goldman Sachs and Bell Potter retaining 'buy' ratings on the stock and valuations above $41.

At $33 it trades on 46x Goldman's estimates for 71 cents in earnings per share for the year ending June 30 2022.

There's a lot of water to travel under the bridge between now and then which means Afterpay is a high-risk bet at these valuations. 

However, if it does meet analysts' aggressive consensus estimates it's possible the stock goes even higher over time. 

Tom Richardson owns shares of AFTERPAY T FPO.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Share Market News

two men smiling with a laptop in front of them, symbolising a rising share price.
Broker Notes

These ASX 200 shares could rise 25% to 60%

Analysts think these shares are top buys and could rise materially.

Read more »

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors finished the trading week on a sour note today.

Read more »

Happy teen friends jumping in front of a wall.
Share Gainers

4 ASX 200 stocks smashing the benchmark this week

Investors are sending these four ASX 200 stocks soaring this week. But why?

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Broker Notes

Bell Potter says this growing ASX 200 stock can rise over 40%

Big returns could be on the cards for buyers of this stock.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Share Market News

Which delivered superior returns in FY25: CSL, A2 Milk, or Telstra shares?

We review the share price growth and dividend income delivered to investors in FY25.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Share Gainers

Why IGO, Johns Lyng, Lynas, and Web Travel shares are pushing higher today

These shares are ending the week on a high. But why?

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Imricor, Ora Banda, Ventia, and Vulcan shares are dropping today

These shares are ending the week in the red. But why?

Read more »