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Top broker hits Afterpay shares with $35.10 price target

Following the release of Afterpay’s impressive FY19 results last week, Ord Minnett has retained their buy rating and raised the price target on the fast-growing tech company by 9%.

In the wake of last week’s explosive FY19 results announcement, APT-AU (ASX: APT) has seen its share price rise over 20% – from A$25.85 the day prior to the earnings release, to A$31.38 at the market close yesterday.

Today Afterpay’s share price fell modestly, to A$31.17 per share.

Since then, we have also seen a new round of broker reports released, two of which were particularly bullish on Afterpay’s future prospects.

This should come as little surprise to those following the young company, with Afterpay seeing strong growth from its US and UK expansion, in addition to the revelation that it has recently partnered up with the payments behemoth VISA.

Afterpay share price forecasts: Ord Minnet

Following Afterpay’s FY19 results, Ord Minnett slapped a buy rating and a A$35.10 per share price target on the young tech company.

This share price forecast predicts that Afterpay’s revenue will reach over A$500m in the 2020 fiscal year.

Ord Minnett noted that Afterpay’s presence in the US continues to grow rapidly, were surprised by the strong traction gained in the recently-launched UK market and pleased that Afterpay’s bad debts continued to trend downwards.

Other key points, including Afterpay’s plan to trial variable payment options – where customers can pay a larger portion of the intended purchase up front, were also key talking points.

Mind you, even though APT-AU is currently a market leader in the quickly saturating buy now pay later space – the broker cited competition and the potential for sales growth to come in below expectations as a key risk to the bullish forecast.

Morgans optimistic: ‘buy’

The financial firm Morgans has also taken a bullish stance on Afterpay (ASX: APT), hitting the buy now pay later company with a buy rating and a share price forecast of A$31.75 per share.

Like Ord Minnet, Morgans was impressed by Afterpay’s product rollout in the US and UK markets, as well as the company’s strong overall sales momentum.

Even so, Morgan’s downgraded its FY20-21 earnings per share expectations based on an anticipated uptick in investment spend.

Overall, and according to the Wall Street Journal, Afterpay (ASX: APT) is positively viewed by analysts: touting an overweight rating, with five buy recommendations and two sell recommendations.

What drove this bullish broker activity?

This bullish activity – both in terms of recent share price gains and the current analyst consensus.

As we previously reported, in the 2019 fiscal year Afterpay saw underlying sales come in at A$5.2bn (+140%), revenue hit A$272.5m (+91%) and active users rise to 4.6m.

Afterpay partners up with VISA

In addition to these strong results, Afterpay also announced a strategic partnership with VISA during its 2019 report.

Though details remain sparse, the central aim of this partnership will involve developing new solutions and pursuing growth opportunities in the US market.

Specifically, as the company noted in its FY19 results presentation:

'The agreements will facilitate Afterpay's ability to expand the delivery of its services to merchants and customers in a more flexible and efficient manner.’

Year-to-date, the APT-AU (ASX: APT) share price has smashed the broader market – rising 161% compared to the ASX 200’s 18.4% gain.

This information has been prepared by IG, a trading name of IG Markets 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. See full non-independent research disclaimer and quarterly summary.

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