The Afterpay Ltd (ASX: APT) share price has rocketed higher over the past few years, thanks in part to its first-mover advantage. Everyday consumers have been increasingly adopting the buy now, pay later (BNPL) company's services as a replacement for credit cards.
Over the past 12 months alone, Afterpay shares have accelerated by more than 80%, reflecting positive investor sentiment.
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How has Afterpay performed in recent times?
At the beginning of COVID-19, Afterpay shares sank to a multi-year low of $8.01 on 23 March 2020. The company's shares quickly picked up as the federal government introduced stimulus packages such as JobKeeper. The initiative was designed to ensure people whose jobs had been impacted by the pandemic would continue to receive a wage and, thus, spend on discretionary items to keep the economy ticking over.
In the months following, Afterpay shares soared to dizzying heights, as the sky appeared to be the limit. The Afterpay share price hit an all-time high of $160.05 in February 2021, before sliding to around the $100 mark by late March. This was due largely to new BNPL competitors such as PayPal Holdings (NASDAQ: PYPL) signalling their interest in entering the market.
Since then, Afterpay shares mostly moved in circles until last week, when the company received a takeover offer from Square Inc (NYSE: SQ) for $39 billion.
The United States-based payments company proposed a fixed exchange ratio of 0.375 shares of Class A common stock for each Afterpay share held. The news sent Afterpay shares flying 30% to a high of $125.00 when the ASX opened up last Monday.
What if you had invested $1,000 in Afterpay shares 4 years ago?
If you had invested $1,000 in Afterpay shares in 2017, you would have bought them for around $2.95 apiece. This would have given you approximately 338 shares, without topping up when they fell to near all-time lows during COVID-19.
Fast-forward to today, the current Afterpay share price at the time of writing is $132.15. This means that those 338 shares would now be worth an astonishing $44,666.70 (338 shares x $132.15). When considering percentage terms, this implies an upside of almost 4,380%.
This is a mammoth return, particularly considering the S&P/ASX 200 Index (ASX: XJO) has given back an average of 6.50% per annum over the last 5 years.
Are Afterpay shares a buy now?
Two brokers rated the company with different price points last week. The first was Morgans, which raised its rating by 8% to $123.40. Following suit, Macquarie also raised its 12-month price target by 14% to a bullish $160.00.
