CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Afterpay share price: will the bulls or bears win in 2020?

We examine where two top investment banks think the Afterpay share price will head in 2020.

Afterpay share price: recent moves

During the last five sessions the Afterpay (ASX: APT) share price rose around 5% and currently trades at the $30.46 mark. Longer-term, the last six months have proven to be a tumultuous period for Afterpay investors. In that period the stock has traded as high as $36.56, on October 15 and as low as $22.34, on August 6.

Volatility aside, analysts have remained mostly positive on the fast-growing, buy now pay later (BNPL) company’s prospects – save for the bearish views from UBS analysts.

With this in mind, and as 2019 draws to a close, we examine the BULL and BEAR cases from two top Australian analysts.

The bull case: a dominant BNPL player

Ultimately, the market opportunity looks simply too large to pass up, thinks world-renowned investment bank Goldman Sachs.

Centrally, Goldman posits that the addressable BNPL market opportunity could be worth as much as $1.0tn – across Afterpay’s key ANZ, UK and US geographies. Citing historical trends in Australia – Afterpay’s ‘stickiness’ means the company may be well positioned to aggressively capture market share and grow its user network in its key markets, particularly the US.

Indeed, as we wrote previously:

‘This [stickiness] forms an important point for a number of reasons, as a strong repeat user base; argues Goldman, has the secondary impact of driving bad debts lower and reducing payment recovery costs.’

Consequently, the investment bank currently has a BUY rating and a lofty price target of $42.90 on Afterpay (ASX: APT)

At current price levels, this would imply upside potential of around 40% for investors.

The bear case: risk, risk and some more risk

Valuation, regulation and competition form the heart of UBS’s bear thesis.

Looking at the valuation side of things, as we previously noted:

‘UBS believes Afterpay would require GMV figures of A$175 billion by the 2030 fiscal year, to justify its share price.’

And though the investment bank does cede that APT is growing quickly – projecting that underlying merchant sales are expected to increase 101% and 56% in FY20 and FY21, respectively – UBS believes the market is too focused on this 'excessive' growth – while downplaying the potential risks Afterpay (ASX: APT) faces.

Besides valuation concerns, competition is a key issue according to UBS. Namley, given the low barriers to entry in the BNPL space and the ease in which well-capitalised players could replicate APT’s product offerings, the investment bank believes this represents a key risk to Afterpay’s dominant market position.

Finally, UBS is also of the opinion that regulatory scrutiny may impact APT’s operations. Citing an ‘Evidence Lab’, UBS found that while Afterpay’s products may not currently fall under the ‘credit’ umbrella from a regulatory standpoint, a significant portion of the Afterpay users the investment bank surveyed as part of this 'Lab' did indeed view APT’s products as ‘credit’.

In step with these points, UBS currently has a SELL recommendation and a price target of $17.60 on the young BNPL company.

Such a bearish price target – if reached – would imply potential downside of around 42% for Afterpay investors.

Practice trading Australian stocks like Afterpay with an IG demo account now

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.