The Afterpay Ltd (ASX: APT) share price was a very impressive performer once again last week.
During the period the payments company's shares smashed the S&P/ASX 200 Index (ASX: XJO) with a stunning 37% gain.
This gain means that Afterpay's shares have now climbed 400% since crashing to a 52-week low of $8.01 in March.
Why did the Afterpay share price rocket higher?
The catalyst for Afterpay's gain last week was news that Tencent Holdings has become a substantial shareholder.
This is potentially a bigger deal than first meets the eye. Tencent Holdings is the US$500 billion owner of the WeChat app which dominates the China market.
WeChat is a multi-purpose messaging, social media and mobile payment app which has over 1.1 billion monthly users.
The payment side of the business has been growing particularly strongly for Tencent. In the fourth quarter of 2019 it exceeded 1 billion daily average transactions for its commercial payments, covered over 800 million monthly active users, and worked with over 50 million monthly active merchants.
Clearly, a partnership of some kind in the future between the two parties could have a material benefit for Afterpay.
Afterpay certainly recognises this. Commenting on the substantial shareholder news, it said: "Tencent's investment provides us with the opportunity to learn from one of the world's most successful digital platform businesses. To be able to tap into Tencent's vast experience and network is valuable, as is the potential to collaborate in areas such as technology, geographic expansion and future payment options on the Afterpay platform."
This was echoed by Tencent's chief strategy officer, James Mitchell.
He said: "Afterpay's approach stands out to us not just for its attractive business model characteristics, but also because its service aligns so well with consumer trends we see developing globally in terms of Afterpay's customer centric, interest free approach as well as its integrated retail presence and ability to add significant value for its merchant base".
Is it too late to invest?
While Afterpay clearly isn't the bargain buy that it was just a little over six weeks ago, I still see a lot of value in its shares for long term focused investors.
There's no guarantee that Tencent's shareholding will lead to an expansion into Asia in the future, but if it does, combined with its existing operations and probable expansion into continental Europe, Afterpay looks well positioned to grow into a global payments giant over the next decade.
