Leading broker slaps buy rating on Afterpay shares

The Afterpay Ltd (ASX:APT) share price is pushing higher on Thursday after a leading broker gave its shares a buy rating…

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

The Afterpay Ltd (ASX: APT) share price is pushing higher on Thursday morning.

In early trade the payments company's shares are up 1.5% to $29.60.

Why is the Afterpay share price pushing higher?

The catalyst for this gain appears to have been a broker note out of the Macquarie equities desk this morning.

According to the note, Macquarie has initiated coverage on Afterpay with an outperform rating and a lofty $38.00 price target.

This price target represents potential upside of almost 31% over the next 12 months based on its last close price.

Why is Macquarie bullish on Afterpay?

Macquarie notes that Afterpay is a leading player in the fast-growing buy now pay later instalments market.

It appears impressed with the rapid adoption of its platform from younger demographics which are turning away from credit cards.

Its analysts believe the US market is the biggest opportunity for the company. It estimates that it is upwards of 20 times bigger than the local market.

And while competition is growing quickly, the broker appears optimistic that it can leverage its early advantage to drive further growth and protect its margins. It also sees opportunities for the company to support its strong market position by differentiating its product offering.

Goldman Sachs.

Macquarie isn't the only broker that is bullish on Afterpay. A note out of Goldman Sachs earlier this month reveals that its analysts have a conviction buy rating and $42.90 price target on the company's shares.

It notes that Afterpay not only has a A$1 trillion market opportunity as a tailwind, but its frequency of use should drive strong operating leverage in the medium term.

One broker that continues to be bearish, though, is UBS. Earlier this month it reiterated its sell rating an $17.60 price target. While it acknowledges that its sales growth has been strong, it has concerns over its valuation and regulatory risks.

James Mickleboro has no position in any of the stocks mentioned. 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

A set of scales with a bag of money balanced against a timer, indicating growth versus value shares
Opinions

Which ASX sector offers the best value heading into earnings season?

I think one sector is particularly compelling.

Read more »

Green stock market graph.
Share Gainers

Here are the top 10 ASX 200 shares today

It was one for the history books today.

Read more »

Person holding a blue chip.
Blue Chip Shares

4 ASX 200 blue-chip shares to hold but not buy: experts

These blue-chips are worth holding if you already own them, but are too expensive for new investors to buy.

Read more »

A bricklayer peeps over the top of a brick wall he is laying with a level measuring tool on top.
Broker Notes

Are Brickworks shares a buy, hold or sell ahead of earnings season?

Brokers have been weighing property gains, US headwinds, and merger impacts to form a view.

Read more »

A man in his office leans back in his chair with his hands behind his head looking out his window at the city, sitting back and relaxed, confident in his ASX share investments for the long term.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Green stock market graph with a rising arrow symbolising a rising share price.
Record Highs

The ASX 200 just hit a new record high. Here's why.

The prospect of lower interest rates is pushing the market into new territory.

Read more »

Three guys in shirts and ties give the thumbs down.
Share Fallers

Why Appen, Emerald Resources, IGO, and Strike Energy shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why Boss Energy, DroneShield, Pilbara Minerals, and Polynovo shares are charging higher today

These shares are having a good time on hump day. But why?

Read more »