Afterpay share price jumps 14% to new record high

The Afterpay Ltd (ASX:APT) share price was on fire on Thursday. Here's why the payments company's shares rocketed 14% higher to a new record high…

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Afterpay Ltd (ASX: APT) share price was on form again on Thursday and stormed notably higher.

The payments company's shares were up as much as 14% to a new record high of $75.26 at one stage before closing the day 11% higher at $73.50.

This latest gain means the Afterpay share price is now up a remarkable 817% from its March low of $8.01.

Why did the Afterpay share price rocket higher?

Investors were fighting to buy the company's shares on Thursday after it was the subject of a very positive broker note out of Morgan Stanley.

According to the note, the broker has upgraded the buy now pay later provider's shares to an overweight rating and lifted the price target on them by a massive 180% from $36.00 to a lofty $101.00.

Even after today's strong gain, this price target implies potential upside of over 37% for Afterpay's shares over the next 12 months.

Why did Morgan Stanley upgrade Afterpay's shares?

Morgan Stanley made the move in response to Afterpay's better than expected credit quality and the acceleration in its sales growth.

The broker is expecting the company's revenue to grow by a compound annual growth rate of 60% through to FY 2022, with a stable net transaction margin of ~2%.

This is expected to be driven by its diversification away from fashion thanks partly to its agreement with eBay, its impending launch into Canada, and its in-store roll out in the United States. The broker expects the latter to strengthen its first mover advantage in the key market.

In addition to this, its analysts note that the company's capital raising now gives it the opportunity to consider M&A activities and further geographic expansion.

Should you invest?

While it shares are certainly high risk, I continue to believe that Afterpay would be a quality buy and hold investment. This is due to its leading position in a rapidly growing market which is benefiting from structural tailwinds.

All in all, even though its shares are up over 800% from their March low, I don't believe it is too late to invest.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Gainers

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors started the week off in a good mood today.

Read more »

Excited couple celebrating success while looking at smartphone.
Share Gainers

Why Bellevue Gold, Bubs, Clarity Pharmaceuticals, and Regal Partners shares are rising today

These shares are starting the week on a positive note.

Read more »

Two people lazing in deck chairs on a beautiful sandy beach throw their hands up in the air.
Travel Shares

Guess which ASX All Ords travel stock just rocketed 17% on an earnings upgrade

Investors are piling into the ASX All Ords travel stock today. Here's what's happening.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Gainers

Why Capricorn Metals, Insignia, Perseus Mining, and Qoria shares are storming higher

These shares are having a strong session on Tuesday. But why?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Amaero, AMP, Block, and South32 shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »