The Afterpay Touch Group Ltd (ASX: APT) share price has continued its recovery on Friday and is up 6% to $19.56 in early afternoon trade.
This gain means the payments company's shares are now down just 5% since the release of its half year results.
Which is quite a turnaround considering they were down as much as 15% at one stage post-release.
Can Afterpay Touch's shares go higher?
Whilst its shares are trading at a significant premium to the market average, I believe the company's strong start to life in the United States has demonstrated its enormous potential and shows that it is deserving of the premium.
I'm not alone in being bullish on the company's prospects. A note out of Goldman Sachs this week reveals that its analysts retained their conviction buy rating and lifted the price target on its shares to $21.00 following the release of its half year results.
This price target implies potential upside of over 7% for its shares over the next 12 months.
Why is Goldman Sachs bullish on Afterpay Touch?
Goldman was very impressed with the company's traction in the U.S. market since its last update and particularly its average frequency of use. According to its research, US average frequency of use is already almost at a level which the ANZ segment achieved after two years.
In addition to this, the broker was pleased with Afterpay Touch's merchant sales target of $20 billion by FY 2022 and a net transaction profit margin of ~2%.
Its analysts believe that the company can achieve this for a number of reasons.
One is that the ANZ business still has a strong runway for growth led by in-store and broadening retailer verticals.
Another reason is the U.S. market opportunity. The company currently has a user base of 900,000 in this market, compared to an addressable market of over 70 million in the millennial cohort alone.
A third reason Goldman expects the company to achieve this target is its upcoming UK launch. The broker notes that it has very similar retail and consumer characteristics as the US and ANZ markets.
Should you invest?
Overall, I agree with Goldman on all points and feel it would be a great long-term investment option along with fellow tech stars Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX). It is a high risk one, though, so may only be suitable for investors with a high tolerance for risk.
