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Should you buy Afterpay shares?

James Mickleboro
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The Afterpay Touch Group Ltd (ASX: APT) share price was a strong performer on Monday.

The payments company’s shares started the week with an impressive 7% gain to $32.64.

This latest gain means that Afterpay’s shares are now up a remarkable 172% since the start of the year.

Why did the Afterpay share price surge higher on Monday?

Investors were scrambling to buy shares on Monday after it released the findings and recommendations of its Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) final audit.

Although the auditor found historical breaches of the AML/CTF act, this was due to the company being given the wrong legal advice in the past. These issues have now been addressed.

Furthermore, none of the six recommendations that the auditor reported appear onerous or disruptive. In fact, one of the recommendations was encouraging Afterpay to engage AUSTRAC regarding its buy-now pay-later service being formally designated as low ML/TF risk in the AML/CTF Rules.

All in all, this appears to have been a very good result for Afterpay.

Goldman Sachs retains its buy rating.

This view was echoed by analysts at Goldman Sachs. According to a note out of the investment bank, it doesn’t believe that AUSTRAC will come after Afterpay like it has with Westpac Banking Corp (ASX: WBC) this month.

Goldman said: “The full report and findings of the audit report are now due to be reviewed by AUSTRAC to determine if any further action/penalties may be applicable. However, based on the summary released by the auditor, we would not anticipate there to be material remedial action necessary from AUSTRAC.”

In light of this, the broker has reaffirmed its conviction buy rating and lofty $42.90 price target on the company’s shares. This price target implies potential upside of over 31% for its shares over the next 12 months.

I think the broker is spot on and would also class its shares as a buy. Though, it is worth noting that it is a high risk option and could be unsuitable for more cautious investors.

The post Should you buy Afterpay shares? appeared first on Motley Fool Australia.

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James Mickleboro owns shares of Westpac Banking. 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019