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Why the Afterpay share price is climbing today

Afterpay Touch Group Ltd (ASX: APT) shares are backing up yesterday’s strong performance with a 6% gain today as investors bid the stock higher on the back of yesterday’s positive AGM trading update. 

According to a report in the Australian analysts were impressed with the update as Bell Potter lifted its ‘price target’ on the shares to $45.50. The research house is reportedly bullish on Afterpay’s deal with eBay citing it as evidence that AfterPay is becoming a leading global payments player.

This looks a reasonable assumption given Afterpay revealed it signed up 15,000 new customers per day on average over October as it hits its straps in the U.K. after its launch into the U.S. that beat all expectations in terms of market share growth.

In total it had 39,450 retailers signed up to its buy-now-pay-later platform as at the end of 2019. 

Given the company is still posting big losses it’s tricky to value, although most analysts are positive on the outlook.

Yesterday Goldman Sachs slapped a $42.90 price target on the shares and noted an additional new partnership with U.S. payments giant MasterCard

At $31.16 the stock trades on 101x the Goldman’s analysts’ estimates of 30 cents in earnings per share over the 12 months to June 30 2021. Looking further out it trades on 44x Goldman’s estimate of 71 cents per share over fiscal 2022.

At these kinds of multiples it’s not going to smoke out the value investors, but the stock is likely to get bid higher if the company meets analysts’ ambitious growth forecasts. 

Junior buy-now-pay-later rivals Splitit Ltd (ASX: SPT) and Sezzle Ltd (ASX: SZL) are also catching a bid today as sentiment around the sector improves. 

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Tom Richardson owns shares of AFTERPAY T FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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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