Shares of fintech darling Afterpay Touch Group Ltd [ASX:APT] have secured the top spot on the ASX 200 gains list today, with an impressive 12.76% rise so far today.
The surge has coincided with an update on APT’s dealings with AUSTRAC regarding the Anti-Money Laundering/Counter Terrorism Financing (AML/CTF) matters flagged in June this year.
According to the update, the interim report from external auditor, Neil Jeans, has been passed on to AUSTRAC.
While the update is light on specifics, investors appear to be reading it as good news.
At time of writing, APT shares are up $3.85, sitting at $35.62.
No news is good news
The update notes that Neil Jeans’ confidential report ‘does not provide any recommendations, which will be left to the final report.’
Investors were also informed that the assessment of implemented and compliant AML/CTF programs within APT’s systems is ‘now underway’.
So with nothing flagged immediately, Afterpay investors will be basking in an ‘interim’ win.
The promise of regulatory blue skies has coincided with a major analyst upgrade on the stock as well…
Goldman Sachs turns bullish on Afterpay
Early this morning it was reported that Goldman Sachs has updated APT shares from a neutral to a buy rating.
They also lifted their APT price target to $42.90, almost 20% higher than the current price at time of writing.
The broker’s optimistic outlook for the fintech comes from repeated usage patterns found in US customers.
They noted ‘74% of transaction value in June 2019 was from returning customers’.
Moreover, Goldman Sachs were impressed by the customer retention in ANZ users, where those on the platform for over three years are transacting more than 20 times a year.
This resonance with users points towards a strong potential for future customer growth, as those who hop onto Afterpay are staying there.
Simply put, good businesses keep customers.
As a result, Goldman Sachs raised their gross merchandise value (GMV) forecast for APT to $29.2 billion by FY2022 — which is about 45% higher than APT’s own $20 billion-plus aim.
Why Afterpay will thrive in a low interest rate world
Afterpay has morphed into a juggernaut.
They’ve lead the ‘buy now, pay later’ movement around the world, determined to shake up traditional banking as we know it.
Back in July, the NAB CEO admitted that low interest rates will squeeze bank margins.
If this does indeed play out — the next logical step could be dividend cuts.
In contrast, Afterpay does not make their money from lending in the same way the big banks do.
So they could be more immune to the pressures that a low/negative interest rate environment could bring.
To find out more about how APT and two other fintechs are leading a break-up of the big banks, check out this free report here. One is a new type of investment platform and the other is modernising the retirement industry.
For Money Morning