The Afterpay Touch Group Ltd (ASX: APT) share price has charged 4.80% higher today as the "buy now, pay later" company rides on the coattails of the Financial Services Royal Commission outcome.
Afterpay's closing price of $17.67 per share means the Aussie fintech has surged 8.07% for the week following the release of Kenneth Hayne's report on Monday afternoon, whilst rival Zip Co Ltd (ASX: Z1P) share price was unchanged in today's trade.
While the Royal Commission was ongoing, Afterpay was subject to a Senate inquiry designed as a catch-all for lenders not within the limited remit of the Commission including "buy now, pay later" services, payday lenders and debt vulture funds. This latest Senate inquiry scrutinised the business model of Afterpay and its fellow competitors and looked at options for further regulation in the sector.
Now boasting a market cap of ~$4 billion, the biggest risk to Afterpay's growth trajectory has always been the looming threat of regulation by the likes of ASIC if the company was deemed to be a credit provider.
Why has the Afterpay share price surged this week?
Afterpay shares soared on Tuesday morning alongside the banks, with the likelihood of continued consumer growth in Australia and more security surrounding its loan facilities with the major banks. I think the major catalyst behind Afterpay's bullish run was also in anticipation of less ongoing scrutiny in its sector, with ASIC and APRA likely to have their hands full following Kenneth Hayne's broadside at the banking regulators in his report.
Commissioner Hayne essentially called for the establishment of a watchdog for the two existing watchdogs and given the public outcry and scale of the banks' wrongdoings relative to that of little old Afterpay, I would expect the threat of further regulation from ASIC, in particular, to subside for Afterpay in the short-term.
So, is Afterpay a 'Buy' at $17.67 per share?
In short, I think the answer is no.
I expect Afterpay to report strong sales and outperform estimates in its half-year results on February 26th. It's got a strong foundation in the United States, and despite signs of slowing growth in Australia, but the threat of competition is high. I'd be putting my money into a capital stability stock such as Wesfarmers Ltd (ASX: WES) and waiting for the Australian reporting season to blow over in the short-term.
