Despite courting controversy so far this year, the Afterpay Touch Group Ltd (ASX: APT) share price has still managed to climb 121% higher to $26.61 per share at yesterday's close.
So, is it too late to buy Afterpay shares or could they surge higher in the second half of 2019?
Why the Afterpay share price has surged higher this year
The key to Afterpay's meteoric share price rise has been (and continues to be) the expansion of its merchant retailer network and outperformance in its periodic earnings.
The company has continued to post strong earnings growth since its June 2017 IPO and this momentum has been carried through to the first half of this year.
In its February half-year results, Afterpay reported underlying sales processed through the Afterpay platform up 147% year-on-year (YoY) to $2.3 billion and a 118% increase in active customers to 3.1 million.
The company's expansion into the United States has also proved successful thus far, with top-line earnings growth and network expansion the keys to its share price growth in 2019.
But wait… it's not all good news for investors
While the Afterpay share price is up 121% so far this year, it hasn't been all smooth sailing for the "buy now, pay later" group.
The company is facing a review of its compliance with financial crime legislation, having recently appointed a specialist auditor for this purpose, and recent significant share sales from its co-founders have made investors nervous about the company's long-term future.
While co-founders Nick Molnar and Anthony Eisen have said they have no plans to sell more shares in FY20, the recent $100 million cash-out has put a question mark over the potential for the Afterpay share price to rise above the $30 mark.
Overall, Afterpay still remains well-positioned in the market but it does have exposure to a broader downturn in the retail sector, or the economy as a whole.
Another key factor at play is the inevitable rise in competition, with the likes of Mastercard, Visa, PayPal and ASX rival Zip Co Ltd (ASX: Z1P) all trying to knock Afterpay off its incumbent perch.
Is it too late to buy Afterpay shares?
In my opinion, the Afterpay share price does look pricey at $26.61 per share, particularly given the company is yet to generate stable, positive free cash flow from operations.
However, the argument that Afterpay is overvalued was also thrown around when the company's share price was trading at around $6 per share around a year ago too.
Personally I wouldn't be buying in at this price, and would be waiting for the company's full-year results in August to see where future growth is likely to come from before making my next move.
