After a few wobbles this week, the Afterpay Ltd (ASX: APT) share price has found its feet and is charging higher on Thursday.
In afternoon trade the payments company's shares are up almost 10% to $120.79.
This leaves the Afterpay share price trading within touching distance of its record high of $123.40.
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Why is the Afterpay share price charging higher?
As well as getting a lift from improving sentiment in the buy now pay later sector today following Affirm's successful listing in the United States last night, Afterpay's shares appear to have been boosted by a bullish broker note released this morning.
According to a note out of Morgan Stanley, its analysts have retained their overweight rating and lifted their price target on the company's shares by 13% to $136.00.
Even after today's strong gain, this price target implies potential upside of over 10% for its shares.
Why is Morgan Stanley bullish on Afterpay?
The broker has been looking into app downloads and notes that the Afterpay app has been experiencing significant demand in the United States and United Kingdom markets.
In light of this, Morgan Stanley is forecasting that the company will report active customers of approximately 13.6 million for the first half of FY 2021. This represents a 37.4% increase from 9.9 million active customers at the end of FY 2020.
And with Afterpay reporting 11.2 million active customers at the end of the first quarter, this will be a 21.4% increase in just the last three months.
As a result of this potentially stronger than expected customer growth, Morgan Stanley has increased its revenue forecasts accordingly.
Pleasingly, the broker doesn't expect Afterpay's strong revenue growth to end any time soon. Thanks to growth in existing markets and its expansion into new ones, Morgan Stanley believes Afterpay is well-placed to deliver a compound annual growth rate (CAGR) of over 60% over the next three years.
