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Is it finally go time for Afterpay shares?

The Afterpay Touch Group Ltd (ASX: APT) share price has well and truly collapsed. APT shares were at an all-time high of $37.42 just 3 weeks ago. But today, you can pick up shares of this buy-now, pay-later (BNPL) giant for just $26.16 – a drop of nearly 30% in under a month.

But is Afterpay a buy at these levels? It does look like a compelling discount on paper, that’s for sure.

What do Afterpay’s numbers look like?

It always shocks me how sentiment surrounding a company can turn just by the movements of its share price. In my view, nothing about Afterpay’s business model has changed over the last month – so why is the market suddenly valuing this business at two-thirds of what it was?

The thing to keep in mind with a company like Afterpay is that it is very difficult to value the future cash flows of a company that has yet to even produce cash flow.

That’s right – Afterpay doesn’t actually turn a profit. In fact, in the June quarter Afterpay reported $61.93 million in revenue, but an operating income loss of -$6.57 million, leading to diluted earnings per share of negative 4 cents. Considering this is a $6.7 billion company, these numbers leave a lot of shaky ground for the valuation to cover.

Still, Afterpay is without a doubt still a growth machine. Millennials can’t seem to get enough of its disruptive payments platform, and its June quarter revenue was up by 94%, year-on-year.

Is Afterpay a buy today?

Despite these numbers, I don’t feel like Afterpay’s current size is worth its future earnings potential. October’s sentiment shift was triggered by a broker note from UBS saying that they think Afterpay is grossly overvalued – giving it a sell rating and a 12-month price target of $17.25.

I do think Afterpay is a disrupter and will continue to shake things up in the BNPL space, I just think there are better opportunities out there today.

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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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.