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Splitit shares are up 120% in 2 months: too late to buy?

The Splitit Ltd (ASX: SPT) share price has been on an absolute tear since late August, rising from around 40 cents per share today’s levels of 90 cents per share – a rise of more than 120% in just two months.

Although APT shares are still below the all-time high of $2 set in March, investors who bought in at the payments company IPO in January at 20 cents a share have still netted a 4-bagger investment (not bad for 10 months effort).

But what’s next for this high-flying payments company? And more importantly, is Splitit a buy at today’s levels?

Why have Splitit shares shot the roof?

I think we can put the IPO fever down to investors drunk on the successes of Afterpay Touch Group Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) and not wanting to miss out on the ‘next’ payments success story. Despite Splitit’s financial data not showing too many knockout numbers, SPT shares went from 20 cents to $2 and back down to $1 all in the space of three months.

Things settled down in the subsequent three months and SPT shares trended slowly lower. By June, Splitit had less than 600 retailers signed up to its payments platform, albeit sporting some big names like Kogan.com Ltd (ASX: KGN).

That was until Splitit announced it had partnered with US-online wunderkind Shopify earlier this month. Shopify allows small shop owners to launch an easy online sales platform and has over 800,000 users in the US and elsewhere (and growing quickly).

This was a huge coup for Splitit and clearly got investors excited – SPT shares jumped 45% on the news.

Where to from here?

It’s up to Splitit to keep the momentum going from here. If the company can make a name for itself through Shopify and hopefully some other big names going forward, I think things can go further from here.

However, Splitit has yet to gain the attention of the big US-based payment providers Visa and Mastercard (which it has hoped to do since IPO). In fact, Visa announced a partnership with rival Afterpay not too long ago, so I personally think this company still has traction issues in the buy-now, pay-later space.

Foolish takeaway

Whilst Splitit has certainly made a lot of investors rich this year, I still think buying in today is strapping yourself to an angry bull – things might go up, but it’s going to be a bumpy ride. I’m not too sold on Splitit, even after the Shopify deal, and I think Afterpay has a far more compelling growth runway at this point. It’s a ‘no-deal’ from me.

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Sebastian Bowen 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 and ZIPCOLTD 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.

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