After a disappointing 43% decline in March, the Afterpay Ltd (ASX: APT) share price has started the month of April on a very positive note.
In afternoon trade on Wednesday the payments company's shares are up 6% to $19.99.
Why did the Afterpay share price crash 43% lower during March?
Investors were selling off the shares of Afterpay and rival Zip Co Ltd (ASX: Z1P) last month following the spread of the coronavirus globally.
Investors were concerned that the coronavirus outbreak could have a major impact on spending, unemployment, and funding. This in turn led to concerns over Afterpay's revenue outlook, potential credit loss rates, and its liquidity position.
In a letter to shareholders, Afterpay dismissed these concerns. Management explained that it has a business model, balance sheet, and customer base that creates a level of protection in times of uncertainty.
This letter appears to have eased concerns and played a key role in its share price recovery in the latter part of the month. In fact, the Afterpay share price is now trading 150% higher than the 52-week low of $8.01 it recorded during March.
Is it too late to invest?
I don't think it is too late to invest if you're planning to make a long-term and patient investment.
This is a view I share with analysts at Goldman Sachs. At the start of the week the investment bank upgraded Afterpay's shares to a buy rating with a $25.10 price target.
This price target implies potential upside of over 25% for its shares over the next 12 months.
Goldman Sachs revealed that isn't concerned by its revenue outlook, potential credit loss rates, and its liquidity position. It believes Afterpay is well-placed to navigate these headwinds and come out of the other end in a stronger position.
It explained: "Our review concludes that even under a materially weaker growth outlook and substantially higher loss rate environment, APT's business model should demonstrate its resilience and be in an even stronger position vs. competitors on the other side of this slowdown."
Though, the broker warned that it could be a bumpy ride for its shares.
The broker added: "Short-term news flow will likely remain negative for retail sales and unemployment trends, and we expect share price volatility to remain elevated."
If you love shares like Afterpay, then you won't want to miss out on this exciting tech share which could be the next market darling thanks to the 5G revolution.
Forget the dot-com boom. This could be 40X better.
Our experts believe 5G is one of the greatest arrivals in technology since the birth of the internet. And this year… we could see an onslaught of new wealth-building opportunities that could be bigger than the dot-com boom.
In our BRAND NEW REPORT we've identified one under-the-radar Melbourne company that we think has cleverly positioned itself to take advantage of the 5G revolution. It's a company that partners with huge global brands such as Disney and Qantas yet you rarely hear about it…
This stock could be our next 'Moonshot' multi-bagger, like when we picked Elmo Software — up 120%. Or Megaport, a Brisbane small-cap stock which is now up 77%.
Find out the name of this 5G stock and four others in our BRAND NEW 5G REPORT.
As of 17/3/20
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.
