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Why the Afterpay share price dropped 5% lower today

One of the worst performers on the ASX 200 index on Tuesday has been the Afterpay Touch Group Ltd (ASX: APT) share price.

The payments company’s shares dropped over 5% to $25.59 this morning. At the time of writing they are 4.5% lower at $25.67.

Why has the Afterpay Touch share price dropped lower?

Investors have been hitting the sell button this morning after the company’s shares were downgraded by a leading broker.

According to a note out of Goldman Sachs, its analysts have removed Afterpay Touch from their coveted conviction buy list and downgraded them to a neutral rating with a slightly improved price target of $27.15.

Goldman Sachs made the move on valuation grounds after a stellar share price rally in 2019 saw its shares trading within an inch of its price target.

What now for the Afterpay Touch share price?

Whilst Goldman Sachs has certainly been a big fan of Afterpay Touch, it wasn’t the most bullish broker out there.

A note out of Ord Minnett in May shows that its analysts have a buy rating and $32.20 price target on the company’s shares. This price target implies potential upside of over 25% for its shares over the next 12 months.

Ord Minnett has been impressed with its merchant additions, customer engagement, and promising start to life in the United States.

Analysts at Bell Potter are almost as bullish with their buy rating and $31.76 price target. This price target implies potential upside of almost 24% over the next 12 months.

So, although Goldman Sachs downgrading its shares to neutral is a bit of a blow to investor sentiment, it is worth remembering that not everyone believes that this is where its bull run ends. But time will ultimately tell which broker has made the right call.

Elsewhere in the industry, the shares of Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) have followed Afterpay lower today following a spot of weakness in the tech sector.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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