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Afterpay Shares Spike From Goldman Report

Afterpay’s shares saw an increase in the first half of the trading day after Goldman Sachs analysts said the buy now, pay later financial service would deliver in its interim profit results.

A note made by Goldman analysts led by Ashwini Chandra stated Afterpay was well positioned to deliver bumper first-half results.

‘We believe it too early to capitalise this potential upside until we can more clearly observe customer addition trends through the March 2020 quarter,’ the report said.

‘Furthermore, we anticipate net transaction profit margins for November and December 2019 are likely to be lower than they may have been for the July to October 2019 period to take into account higher default rates with the seasonally strong sales.’

The report also noted the customer base of Afterpay could be close to 7.2 million globally as of December 31 – based on the latest app download data.

It also estimated gross merchandise volumes of around $4.8bn for the first half, adding to the $3.7bn disclosed in their November update.

FILE – In this Oct. 16, 2014, file photo, a screen at a trading post on the floor of the New York Stock Exchange is juxtaposed with the Goldman Sachs booth. Goldman Sachs reports financial results Tuesday, Oct. 18, 2016. (AP Photo/Richard Drew, File)

It comes after Afterpay’s shares climbed more than 4 per cent in early Tuesday trading.

But despite Goldman’s positivity, the broker didn’t bolster its full-year profit forecasts, noting potential for softer trends in January and February.

‘We believe it too early to capitalise this potential upside until we can more clearly observe customer addition trends through the March 2020 quarter,’ the report said.

Traders work in the Goldman Sachs booth on the floor of the New York Stock Exchange Thursday, March 15, 2012. Greg Smith, an executive director at Goldman Sachs, resigned with a blistering public essay that accused the bank of losing its “moral fiber,” putting profits ahead of customers’ interests and dismissing customers as “muppets.” (AP Photo/Richard Drew)

‘Furthermore, we anticipate net transaction profit margins for November and December 2019 are likely to be lower than they may have been for the July to October 2019 period to take into account higher default rates with the seasonally strong sales.’

Goldman Sach’s 12-month target price for Afterpay is $42.90.

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