This is getting ridiculous… The Afterpay Touch Group Ltd (ASX: APT) share price has surged over the last 48 hours and is now trading at $23.26 – up over 15% from its Tuesday open on $20.20. So what's behind this obscene price surge? And is Afterpay a buy at these levels?
Afterpay shares have spent most of 2019 on an upward trajectory after reporting very promising numbers from its US growth program and detailing plans of its imminent launch in the UK (albeit without the Afterpay brand). Afterpay shares spiked in early April after the company reported that it had passed the 1.5 million customer mark in the US after just one year in the market. And continued to mark a record high of $28.70 in early May.
What happened?
However, this all came to a screeching halt last week when Afterpay revealed that AUSTRAC (a government agency) had demanded an audit of its compliance with money laundering and terrorism-financing laws. It's not the first time Afterpay has been in hot water with the government, with a Senate committee last year investigating whether Afterpay should be more stringently regulated (they decided it wasn't necessary).
Afterpay's share price quickly plummeted back toward the $20 level on the AUSTRAC news. That was two days ago before the big surge we have seen since.
What's behind the 15% rise?
Afterpay is a stock that's become a swing traders dream and I think we have had that demonstrated all over again. Afterpay's share price has been in the speculative clouds for a while now and, thus, is very susceptible to good and bad news. Whether or not AUSTRAC makes adverse findings against the company, it is not likely to affect Afterpay's US or UK businesses, where the big bucks lie for the company. This price surge is the market factoring this in (in my opinion) now that the scary headlines are old news.
Foolish takeaway
In my view, Afterpay remains an extremely risky investment at these prices and (as we have seen) is very exposed to any form of bad news. Unless you're feelin' crazy-brave, I would be steering clear for the meantime.
