The company continues to benefit from a shift to online because of the pandemic restrictions while government stimulus is also helping boost consumption.
Hence, UBS takes a more positive view on sales and increases FY21 and FY22 forecasts by 20% and 13% respectively.
Still, the broker believes the market is failing to appreciate the capital intensity required to fund growth.
UBS points out Afterpay differs from a traditional technology stock in that it is capital intensive.
As it grows its receivables book, every new customer acquired must be funded, reducing free cash generation.
UBS retains a Sell rating and raises the target to $25 from $14.
Sector: Software & Services.
Target price is $25.00.Current Price is $67.50. Difference: ($42.50) – (brackets indicate current price is over target). If APT meets the UBS target it will return approximately -170% (excluding dividends, fees and charges – negative figures indicate an expected loss).