The Afterpay Ltd (ASX: APT) share price has started the week in a disappointing fashion.
Despite the S&P/ASX 200 Index (ASX: XJO) pushing higher, the payments company's shares are down 1% to $18.89.
Is the Afterpay share price in the buy zone?
This share price weakness could be a buying opportunity for investors according to Goldman Sachs.
A broker note reveals that it has upgraded Afterpay's shares to a buy rating with a $25.10 price target.
This price target implies potential upside of over 31% based on its last close price.
Why is Goldman Sachs positive on Afterpay?
The broker made the move on valuation grounds after the Afterpay share price fell sharply in March.
This heavy decline was triggered by concerns over its revenue outlook, potential credit loss rates, and its liquidity position. All were due to the coronavirus outbreak and its impact on spending, unemployment, and funding.
Goldman isn't concerned by this and believes Afterpay is well-placed to navigate these headwinds.
It explained: "Our review concludes that even under a materially weaker growth outlook and substantially higher loss rate environment, APT's business model should demonstrate its resilience and be in an even stronger position vs. competitors on the other side of this slowdown."
However, the broker has warned that the coming weeks and months could be bumpy for the Afterpay share price.
Goldman notes: "Short-term news flow will likely remain negative for retail sales and unemployment trends, and we expect share price volatility to remain elevated."
What about its rivals?
Goldman expects Afterpay to fare better than its rivals Klarna, Sezzle Inc (ASX: SZL) and Zip Co Ltd (ASX: Z1P) during the crisis due to its higher frequency of use.
It explained: "We believe that most of APT's competitors through this downturn will fare relatively worse as they suffer from lack of scale in customers, lack of frequency of use from these customers and slower turn of their receivables books."
This could make Afterpay shares the go to option for investors in the buy now pay later industry right now.
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As of 17/3/20
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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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.
