The last two and half months have been largely uneventful for the Afterpay Ltd (ASX: APT) share price.
Since the initial reaction to agreeing to be acquired by Square (NYSE: SQ) on 2 August, the buy now pay later (BNPL) provider's shares have traded largely flat and ended last week at $126.00.
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Could the Afterpay share price reach $150 by the end of 2021?
As I alluded to above, Afterpay is in the process of being acquired by US payments giant Square.
And unlike a takeover with a fixed dollar price, this takeover is an all-scrip deal. This will see Afterpay shareholders receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay share they hold.
This means that the Afterpay share price is intrinsically linked to the Square share price between now and the transaction completion. If the latter rises, so too does the former. And vice versa if Square's shares fall.
So if the Afterpay share price is going to climb to $150.00 by the end of the year, the Square share price is going to have to get moving.
Bullish broker
The good news for Afterpay shareholders is that one leading broker is bullish on Square. That broker is Jefferies.
According to a note from earlier this month, courtesy of CNBC, its analysts have commenced coverage on the company with a buy rating and US$300 price target.
Jefferies analyst Trevor Williams has called Square a "must-own" stock, noting that its increasingly popular Cash App is "the leader within the crowded neobank category" with "40 million monthly active users that are already highly engaged."
In addition, the broker appears to be a fan of the proposed acquisition of Afterpay.
Williams commented: "So we just think the inherent advantage of a scaled user base and a track record of demonstrated innovation in the cash app really position it well over the longer term. And then when you plug in the benefits of Afterpay, we think the positive flywheel effect there is only going to accelerate over the coming years."
What does this mean for Afterpay shares?
Based on current exchange rates and the fixed exchange ratio of 0.375 shares, if the Square share price were to reach Jefferies' price target of US$300, it would imply a takeover price of $150 per Afterpay share.
All in all, this indicates that there is potential for the Afterpay share price to be trading at that level by the end of the year.
Though, it is worth noting that shares usually trade at a discount to the takeover price to account for uncertainty. As a result, Square's shares may need to trade a little beyond Jefferies' price target to make this a reality.
