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The Afterpay share price just hit a record high: Is it still a buy?

The Afterpay Ltd (ASX: APT) share price was on form again on Monday and charged notably higher.

At one stage the payments company’s shares were up over 9% to a record high of $43.68.

This means that Afterpay’s shares have gone from a 52-week low of $8.01 on March 23 to a new record high in just seven weeks.

To put that into context, if you had been brave enough to invest $10,000 into Afterpay’s shares at its low, your investment would have been worth $54,500 on Monday.

Why is the Afterpay share price at a record high?

There have been a couple of catalysts for Afterpay’s strong gains over the last seven weeks.

The first catalyst was a third quarter update which quashed concerns that the company’s buy now pay later platform would struggle during the current crisis.

During the third quarter the company delivered underlying sales of $2.6 billion, up 97% on the prior corresponding period. This was driven by a 40% lift in ANZ sales, a 263% increase in US sales, and a $0.1 billion contribution by the UK business.

But arguably best of all was its gross losses metric. This remained in line with the first half at 1%, which was particularly positive given the crisis and the increased contribution from newer markets that traditionally have initially higher losses early in the lifecycle.

This was achieved partly by its pre-emptive adjustments to risk settings, such as paying your first instalment up front, and increasing repeat customers.

The second catalyst for its strong share price gain was news that Tencent Holdings has become a substantial shareholder.

Investors appear optimistic the US$500 billion WeChat owner will be the key to opening up the Asian market in the future.

Management certainly sees a lot of positives in having Tencent on the share registry. 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.”

Is it too late to invest?

While I would say that Afterpay’s shares are probably fully valued now, I would still be a buyer if you plan to hold onto them for the long term.

Along with Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX), I think Afterpay is one of the best tech shares on the Australian share market and believe it could generate strong returns for investors over the next decade.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Appen Ltd. 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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