The Afterpay Ltd (ASX: APT) share price has defied gravity and set a new record all-time high of $98.68 this morning. With its share price chart looking almost vertical in recent months, what's next for the Afterpay share price?
A tech share bull market?
The broader tech market has been running strong with the Nasdaq Composite (NASDAQ: .IXIC) eyeing previous record all-time highs set in September. Back at home, the S&P/ASX 200 Index (ASX: XJO) finally broke out of its COVID-19 induced trading range between 5725 and 6200 in intraday trading yesterday. The strength in the ASX 200 has seen the S&P/ASX All Technology Index (ASX: XTX) deliver a 1-month return of 20% and 5-day return of 10%. Clearly the recent strength in the broader market and tech shares has supported the Afterpay share price run. However, give Afterpay an inch and it'll take a mile.
Broad BNPL run
The Afterpay share price has run almost 23% in October, at the time of writing. However, it isn't an outlier as there has been a broad appreciation in buy now, pay later (BNPL) share prices in October.
- Zip Co Ltd (ASX: Z1P) share price up around 22%
- Openpay Group Ltd (ASX: OPY) share price up around 9%
- Sezzle Inc (ASX: SZL) share price up around 18%
- Splitit Payments Ltd (ASX: SPT) share price up around 12%
- Laybuy Group Holdings Ltd (ASX: LBY) share price up around 16%
I believe Afterpay and Zip are clear leaders in the BNPL sector. As such, I am avoiding other players which I believe have exhibited inferior share price performance, despite appearing 'cheaper' or 'playing catch up'. Nonetheless, the BNPL sector appears to have put the fears regarding Paypal Holdings Inc (NASDAQ: PYPL) and increased competition from players such as the big 4 banks behind it.
What's next for the Afterpay share price?
Personally, I believe the Afterpay share price has largely had its run and without additional announcements or a push from the broader market, is likely to pullback from current prices. Afterpay typically holds its AGM in mid-November at which it will likely update the market with its transaction volumes, geographic expansions and/or partnerships. Investors should look out for details such as:
- Transaction/revenue growth and any potential impacts due to competition/Paypal
- Update for its North America expansion into Canada in August 2020
- Acquisition of Pagantis to launch in Spain, France and Italy with regulatory approval to also operate in Portugal
- First step in Asia with its small acquisition of a Singaporean-based company operating in Indonesia (EmpatKali)
- Potential opportunities leveraging its Tencent Holding Ltd (HKG: 0700) network and relationships to expand into new regions in Asia
Foolish takeaway
I believe buying the Afterpay share price at today's prices would be the equivalent of chasing your losses. If I was still eager to buy Afterpay shares, I would instead be watching closely on the side lines for a better risk/reward entry price.
