With the US unemployment rate rising sharply in April, Morgan Stanley notes many investors are questioning why there is no increase in gross credit losses in the March quarter for Afterpay.

The broker suggests a reason could be that Afterpay requires a 25% up-from payment and changes its credit criteria rapidly. Still, the broker forecasts gross credit losses to rise to 1.2% in the second half from 1.0% in the first half, and peak at 1.6% in the first half of FY21.

Equal-weight rating. Target is $36. Industry view is In-Line.

Sector: Software & Services.

Target price is $36.00.Current Price is $42.00. Difference: ($6.00) - (brackets indicate current price is over target). If APT meets the Morgan Stanley target it will return approximately -17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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