There’s no stopping the meteoric rise of ‘buy now, pay later’ online retail startup Afterpay Touch Group Ltd (ASX: APT) after the the stock kept the champagne on ice at HQ after coming tantalisingly close to changing hands for $10 this afternoon.
The stock closed at up another 5% at $9.91, but got to $9.98 as the business is now riding a wave of support from powerful brokers like Goldman Sachs that reportedly tipped the shares to hit $11.15 in due course.
According to an article by my colleague James Mickleboro, Goldies expects Afterpay to generate total revenue of $229.5 million in FY 2019 and then $414.3 million in FY 2020. On the bottom line this is expected to result in earnings per share of 10 cents in FY 2019 and 25 cents FY 2020.
I must say these forecasts come across as bullish and if Afterpay is able to execute it will go down as Australia’s leading post-GFC startup story that I’m aware of anyway.
The company really found its mojo after merging with previously listed online payments software group Touchcorp Ltd (ASX: TCH), which at the time some critics complained was a bad deal for TouchCorp investors who will be laughing all the way to the bank now.
Perhaps most impressive about the Afterpay business is the speed with which it appears to have been able to successfully scale and execute as a hyper-growth startup.
If it can repeat the trick in the giant U.S. market it may well meet the lofty expectations the market is ascribing, with it trading on 40x Goldman Sachs’ estimates for FY2020’s profits.
This is an investment that comes with a great deal of risk then given the consumer credit space it plays in with potential for things to unravel operationally if it does not excel at risk management regulatory and operational space.
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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.