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Leading broker slaps buy rating on Afterpay shares

James Mickleboro

The Afterpay Ltd (ASX: APT) share price is pushing higher on Thursday morning.

In early trade the payments company’s shares are up 1.5% to $29.60.

Why is the Afterpay share price pushing higher?

The catalyst for this gain appears to have been a broker note out of the Macquarie equities desk this morning.

According to the note, Macquarie has initiated coverage on Afterpay with an outperform rating and a lofty $38.00 price target.

This price target represents potential upside of almost 31% over the next 12 months based on its last close price.

Why is Macquarie bullish on Afterpay?

Macquarie notes that Afterpay is a leading player in the fast-growing buy now pay later instalments market.

It appears impressed with the rapid adoption of its platform from younger demographics which are turning away from credit cards.

Its analysts believe the US market is the biggest opportunity for the company. It estimates that it is upwards of 20 times bigger than the local market.

And while competition is growing quickly, the broker appears optimistic that it can leverage its early advantage to drive further growth and protect its margins. It also sees opportunities for the company to support its strong market position by differentiating its product offering.

Goldman Sachs.

Macquarie isn’t the only broker that is bullish on Afterpay. A note out of Goldman Sachs earlier this month reveals that its analysts have a conviction buy rating and $42.90 price target on the company’s shares.

It notes that Afterpay not only has a A$1 trillion market opportunity as a tailwind, but its frequency of use should drive strong operating leverage in the medium term.

One broker that continues to be bearish, though, is UBS. Earlier this month it reiterated its sell rating an $17.60 price target. While it acknowledges that its sales growth has been strong, it has concerns over its valuation and regulatory risks.

The post Leading broker slaps buy rating on Afterpay shares appeared first on Motley Fool Australia.

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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 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