The Afterpay share price is up a massive 700% since March. Is it still a buy?

Here’s why the Afterpay Ltd (ASX: APT) share price is still in the buy zone despite a rapid surge in recent months?

| More on:
Investor riding a rocket blasting off over a share price chart

Image source: Getty Images

The Afterpay Ltd (ASX: APT) share price has been on a tear lately. It has rocketed from $8.90 in late March to a high of $77 yesterday before closing at $74.90. That’s an increase of more than 700%!

This growth is being fueled by strong domestic activity and an aggressive overseas expansion strategy.

In light of such a rapid recent rise in the Afterpay share price, is the buy now, pay later (BNPL) provider still in the buy zone?

Impressive fourth quarter growth

Afterpay has continued to perform strongly in recent months. This is despite growing competition from other BNPL providers such as Openpay Group Ltd (ASX: OPY) and Zip Co Ltd (ASX: Z1P).

The company revealed impressive performance across its entire business in a trading update in July.

Underlying sales came in at $11.1 billion during FY 2020. This was up 112% – more than double the sales – on the prior corresponding period (pcp). Underlying sales during the fourth quarter were particularly high at $3.8 billion, more than 127% higher than in FY 2019.

 Growth in recent months has been fueled by the rapid rise of online shopping during the coronavirus pandemic. Afterpay’s BNPL platform is becoming increasingly popular with online shoppers as an alternative to traditional credit card online payments.

Active customer base continues to soar

Afterpay’s active customer base reached 9.9 million during FY 2020. That’s a 116% increase on the prior year.

Growth is being driven by Afterpay’s growing presence in overseas markets. Afterpay’s US customer base reached 5.6 million in June, while the 1 million customer milestone was reached in the UK. During the first quarter of 2021, Afterpay’s expansion into Canada is scheduled to begin, along with the in-store rollout within the huge US market.

Afterpay has flagged FY 2021 as a year of increased investment as it looks for additional overseas investment opportunities to achieve further global scale. This growth will be partly fueled by a fully underwritten institutional placement to raise $650 million. In addition, a share purchase plan is anticipated to raise approximately $150 million.

Afterpay is yet to achieve the breakeven point in terms of profitability. However the BNPL provider is anticipating that its net transaction loss (NTL) will to be up to 38 basis points for FY 2020.

Foolish Takeaway

Despite a strong recent surge in the Afterpay share price, I believe there is potential for still more strong share price growth in the next few years, fueled by the company’s aggressive overseas growth strategy.

Afterpay’s potential to make strong inroads into the large US market in particular is massive. However, with such a strong  share price rise recently, be ready for some potential share price volatility during the short term.

Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

*Returns as of 15/2/2021

Phil Harpur owns shares of AFTERPAY T FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

More on Share Market News

a group of people gathered around a laptop computer with various expressions of interest, concern and surpise on their faces. All are wearing spectacles.
Broker Notes

Broker says Life360 (ASX:360) share price has ~80% upside

The Life360 Inc (ASX: 360) share price was one of the best performers on the Australian share market in 2021. …

Read more »

best asx shares represented by best in show ribbon
Broker Notes

3 ‘champion stocks’ for ASX investors in 2022

If you’re a fan of buy and hold investing, then you may want to look at the “champion stocks” listed …

Read more »

Young woman in yellow striped top with laptop raises arm in victory
Share Gainers

These were the best performing ASX 200 shares last week

The S&P/ASX 200 Index (ASX: XJO) had a week to forget after the US Federal Reserve indicated that it would start to …

Read more »

asx share price falling lower represented by investor wearing paper bag on head with sad face
Share Fallers

These were the worst performing ASX 200 shares last week

It was another tough week for the S&P/ASX 200 Index (ASX: XJO) after the US Federal Reserve indicated that it would start …

Read more »

a group of stockbrokers sit in a room with a computer and writing on a wall in chalk indicating calculations and graphs while discussing something on the computer screen.
Broker Notes

Here’s what 67% of brokers think of the current IAG (ASX:IAG) share price

Key points The IAG share price traded up today IAG has made a solid start to the year having rallied …

Read more »

Top 10 - asx shares today
Share Market News

Here are the top 10 ASX shares today

Today, the S&P/ASX 200 Index (ASX: XJO) fought back against the selling pressure throughout the day to finish in the green. …

Read more »

The word inflation written with a ticking time bomb.
Share Market News

Why is it when Jerome Powell sneezes, the ASX 200 catches a cold?

Key points The ASX 200 took a hit following comments from the United States Federal Reserve chair Jerome Powell Expectations …

Read more »

A female financial services professional with a manicured black afro hairstyle turns an ipad screen to show a client across the table a set of ASX shares figures in graph format
Bank Shares

Goldman tips Bank of Queensland (ASX:BOQ) share price to rise 25%

If you’re interested in gaining exposure to the banking sector, then it could be worth considering Bank of Queensland Limited …

Read more »