The Afterpay Ltd (ASX: APT) share price has been a hot commodity in 2020. In fact, shares in the buy-now-pay-later leader surged 51.96% last month as investors scrambled to buy in while the S&P/ASX 200 Index (ASX: XJO) jumped 4.22% higher.
Why did the Afterpay share price surge 50% higher in May?
The company announced it reached 5 million active customers in the USA during May. Afterpay now has nearly 9 million customers in the US with a 30-40% increase in the weekly run rate from January and February.
More than 15,000 brands now offer, or are in the process of offering, Afterpay to their customers. Afterpay also reported 15 million app and site visits in April 2020 which was good news for shareholders and the company’s share price.
The positive update was just one factor pushing the group’s shares higher. Chinese internet giant Tencent Holdings purchased a 5% stake in the Aussie company for $300 million. This could provide an opening to the lucrative Chinese market for Afterpay in the years ahead.
These were just a couple of the catalysts pushing Afterpay’s value past $12 billion. I also think momentum was a huge contributing factor following on from the strong surge its share price enjoyed in April 2020.
This momentum helped push the Afterpay share price to a new all-time high of $50.01 in May before it closed the month at $47.41 per share. If the strong growth continues in 2020, I can see Afterpay climbing inside the ASX 50 before the year is out.
Should you buy into Afterpay?
It’s hard to bet against an ASX 200 share that is up 435% since 23 March. However, the Afterpay share price is hot property right now and I think it could be dislocated from fundamentals.
This means I see Afterpay as a speculative buy. It could provide great growth potential and be a strong share to buy in 2020. However, there is still competition and regulatory risk that threaten Afterpay’s potential growth.
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More reading
- 3 best stocks for ASX 200 investors in retirement to buy now
- Why these 3 ASX 200 blue chips could be set for growth this week
- Why the price of these ASX travel shares soared over 30% since mid-May
- 3 top ASX dividend shares to buy now
- 3 ASX 200 shares to watch this week
Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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.
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