How much would a $10,000 investment in Afterpay Ltd (ASX: APT) shares in March be worth today?
Well, 2020 has been a bumpy ride so far (to say the least!). The S&P/ASX 200 Index (ASX: XJO) started the year off at 6,690 points, rose to 7,162 by mid-February, fell to 4,546 points by mid-March and is back up to 6,076 points at the time of writing.
But the Afterpay share price makes that rollercoaster ride look like a Seine river cruise.
Afterpay shares started 2020 at $30.63. By February, the company was pushing $40 a share, but Afterpay was walloped in the March crash and was slammed down to roughly $8 a share in rapid time. But the recovery was just as kind as the crash was savage — even more so. Between 23 March and 26 March, Afterpay shares were back up 118% from this low. A month after that, up another 42%. Add another month and another 63%.
You get the idea.
The bottom line: between 23 March and today, Afterpay has rewarded its shareholders with a ~730% rise.
That means that anyone who bought $10,000 worth of Afterpay shares on 23 March for $8.01 would have acquired 1,248 shares and left with some change. Those 1,248 shares would today be worth… $92,077 on current prices.
Cue violins for us mere mortals who missed out on this extraordinary return.
Why did Afterpay shares shoot the moon?
Afterpay shares have benefitted from a number of tailwinds since the lows in March. Back then, the full extent of the coronavirus crisis (and the lengths that governments would go to assuage it) wasn't clear. As a quasi-credit provider, investors were fearful that Afterpay would be faced with a wave of defaults and an exodus of users. The opposite has proven true. Afterpay has managed to increase its customer base by 116% to 9.9 million in FY2020 compared to the previous year.
Additionally, the company announced in May that Chinese e-commerce giant Tencent Holdings had acquired a 5% stake in Afterpay. That sent Afterpay shares up even higher when it was announced.
Is there still time to buy Afterpay?
Unfortunately, I think any upside that was in the Afterpay share price has been well and truly absorbed by the market. That means a buy today is a bullish bet on the company's future growth, rather than a 'fair value today' kind of investment.
If you think Afterpay has what it takes to continue to shake off competition and spread into the markets it has yet to conquer, then today's price might still be cheap. Afterpay's current market capitalisation is around $20.67 billion, which still looks pretty good compared with a payments giant like Visa Inc. (with a ~US$418 billion market cap) if you think it can rival companies like this one day.
For me though, the current Afterpay share price is still a little frothy, so I'm happy to wait until a better buying opportunity presents itself.
