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Why the Afterpay share price climbed 31% higher in January

The Afterpay Ltd (ASX: APT) share price rocketed 31.66% higher in January as the buy now, pay later (BNPL) group continues its incredible growth.

With Afterpay set to report its earnings on 20 February, is there time to buy in at a good price?

Why the Afterpay share price rocketed in January

The Afterpay share price closed out the month at $38.55 per share and hit a new record high on Friday. The company’s market capitalisation has now tipped past the $10 billion mark following the recent gains.

That means the BNPL leader’s shares have now soared more than 400% in the last 2 years. And given the company’s success, that growth doesn’t look like slowing down any time soon.

It was an action-packed month for Afterpay to start the year. The California Department of Business Oversight (DBO) rejected a lending application for BNPL rival Sezzle Inc (ASX: SZL). Afterpay has also applied for a license to operate in California and received the green light from the DBO on 12 November 2019.

The Aussie BNPL leader also announced a new code of conduct alongside Zip Co Ltd (ASX: Z1P) in January. The code, developed by the Australian Financial Industry Association, comes amid an ongoing debate into regulation in the BNPL sector.

It appears as if Afterpay and Zip are getting on the front foot alongside the likes of Openpay Ltd (ASX: OPY).

The Afterpay share price has also finished the month strongly despite an increasing competition threat. Commonwealth Bank of Australia (ASX: CBA) has tripled its investment in Afterpay’s Swedish rival Klarna.

CBA is tipping in a further US$200 million as it backs Klarna’s expansion into Australia. Klarna dwarfs Afterpay in terms of size and scale, with over 85 million customers and 200,000 merchants. In contrast, Afterpay had 5.2 million customers in late August 2019 with 35,300 merchants available to consumers.

Should you buy into Afterpay?

There’s always the feeling as an investor that you’ve missed the growth boat. However, if you thought that at the start of 2020 you would have missed out on a 30% gain.

The Afterpay share price is trading at a high price-to-earnings multiple. But I think you’d be brave to bet against the Aussie BNPL group ahead of the February earnings result.

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Kenneth Hall 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 recommended Sezzle Inc. 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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