The Afterpay Touch Group Ltd (ASX: APT) share price fell today after giving the market a business update.
There were both positives and negative in the market release.
The Afterpay negative
Afterpay said that in July 2018 the buy now, pay later company amended its anti-money laundering / counter-terrorism, financing (AML/CTF) compliance framework to incorporate obligations in relation to the services provided to customers.
However, Afterpay is currently in talks with AUSTRAC regarding issues that AUSTRAC has raised regarding the AML/CTF compliance, but the outcome of those talks is yet to be determined. But Afterpay did say it hasn't identified any money laundering or terrorism financing activity via its systems.
Afterpay is appointing a leading professional services firm to conduct an independent review of the design and operations to see if any further improvements or actions can or should be made.
As you can imagine, the market is a bit wary of this development.
The Afterpay positives
But Afterpay did have a lot of good news. It reported that for the first 11 months to the end of May 2019 underlying sales grew by 143% to $4.7 billion.
Afterpay said it has over 4.3 million customers and it's adding an average of 7,900 customers a day. Since the end of December 2018 Afterpay has added 7,400 active merchants, which was an increase of 32%.
The buy now, pay later business maintained its gross loss, net transaction loss and net transaction margin for the year to May 2019 to a similar level to the six month period to December 2018. This is pleasing as the business is growing rapidly in the US.
Foolish takeaway
Afterpay is currently trading at 86x FY21's estimated earnings. There's too much optimism baked into the Afterpay share price in my opinion, a lot has to go right for the share price to be the right level today.
