In morning trade the Afterpay Touch Group Ltd (ASX: APT) share price is on course to finish the week on a positive note.
At the time of writing the payments company's shares are up 3.5% to $24.32.
This means that its shares have now risen a staggering 96% since the start of the year.
Can the Afterpay Touch share price go higher?
Although its shares have been on fire this year, I still see meaningful upside ahead for them if it can continue to build on its strong start to life in the U.S. market.
One broker that certainly believes its shares can run higher from here is Goldman Sachs.
According to a note out of the investment bank this morning, it has retained its conviction buy rating and lifted the price target on its shares by 29% to $27.00.
This price target implies potential upside of over 15% for its shares over the next 12 months based on its last close price.
Why is Goldman Sachs even more bullish on Afterpay Touch?
Goldman increased its price target on the company's shares after revising its valuation approach and upgrading its estimates following a review of the latest indicators in the U.S. market.
The note reveals that early signs of success in the US remain strong. This includes a record month of U.S. app downloads, growing website visit numbers, and an increase in U.S. retailers on its platform.
However, the broker believes that the company will need to invest in infrastructure to support this strong growth, so its estimates have been upgraded mainly on the top line.
In addition to this, Goldman has introduced a new estimate into its valuation – Lifetime Value per user.
The broker's estimates imply a per-share value of ~$23.10 by FY 2021. However, if the company can achieve a 25% penetration rate of the millennial user cohort in the U.S. and UK, this could generate a value of ~$35.30 per share.
Its analysts chose to add this metric into their valuation approach as they believe that Afterpay Touch's share price is likely to correlate strongly with user addition numbers.
Which is good news for shareholders as Goldman has upgraded its customer number estimates significantly. It expects 1.85 million customers in the U.S. at the end of FY 2019, compared to a forecast of 1.4 million previously. And then by FY 2021, it has estimated a massive 6.6 million U.S. customers.
Should you invest?
I agree with Goldman Sachs and think Afterpay would be a great long term investment. I would suggest investors consider it along with fellow tech stars Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).
