It has been another stellar day for the Afterpay Ltd (ASX: APT) share price.
On Wednesday the payments company’s shares continued their positive run and charged 7.5% higher to end the day at $54.52.
At one point the Afterpay share price was up over 8% to a new record high of $54.85.
Why did the Afterpay share price hit a record high today?
The catalyst for this gain appears to have been a broker note out of Bell Potter.
According to the note, the broker has retained its buy rating and lifted the price target on Afterpay’s shares to a lofty $65.00. This price target implies potential upside of over 19% from today’s close price.
The broker believes that integrating its platform with key ecommerce and payment infrastructure players will be key drivers of underlying sales growth in the future.
It notes that Afterpay is working with both Visa and Mastercard. It also believes there is potential for it to expand its relationship with eBay into the US or UK markets. Afterpay is currently available on eBay’s Australian platform.
In addition to this, Bell Potter sees opportunities for Afterpay and WeChat owner Tencent Holdings to collaborate over the medium term. Given the clout that Tencent has in the Asian market, this could be a very big deal.
And finally, while Afterpay’s shares may trade at a significant premium to the market average, Bell Potter notes that it trades on lower multiples than sector peer Shopify. This is despite it having double the sales growth trajectory of the Canadian ecommerce giant.
Should you invest?
While Afterpay is certainly a high risk option due to the aforementioned premium its shares trade at, I believe it has the potential to more than justify this.
Overall, I think Afterpay can be a giant of the payments industry in the future, which is why I would still buy it with a long term view.
Though, given the risks involved, it might be prudent to restrict an investment to just a small part of a balanced portfolio.