The Afterpay share price jumped 33% in August: Is it too late to invest?

The Afterpay Ltd (ASX: APT) share price was on form in August and was among the best performers on the S&P/ASX 200 Index (ASX: XJO).

The payments company’s shares continued their positive run and recorded an impressive 33.4% gain over the month.

Why did the Afterpay share price rocket higher in August?

Investors were buying Afterpay’s shares last month following a series of positive updates.

The first was a a surprise upgrade to its earnings before interest, tax, depreciation and amortisation (EBITDA) guidance for FY 2020.

Due to better than expected collections after the end of June, Afterpay’s net transaction losses were far lower than it first forecast. As a result, the company delivered a 73% increase in EBITDA to $44.4 million. This compares to its previous guidance of EBITDA in the range of $20 million to $25 million.

Also getting investors excited was news that the company’s global expansion will continue in FY 2021.

After launching in Canada in July, Afterpay will soon expand into the European market via the acquisition of Spain-based Pagantis for 50 million euros.

Pagantis provides a range of buy now pay later and traditional credit services across Spain, France, and Italy. It also has regulatory approval to operate in the Portugal market. Management notes that the addressable ecommerce market in these four countries exceeds 150 billion euros or $247 billion.

It currently has ~1,400 active merchants and ~150,000 active customers using its platform. Merchants and customers that are relevant to its European launch strategy will be invited to transition onto the re-configured product upon launch in the third quarter of FY 2021.

But its expansion plans don’t stop there. With its full year results, the company revealed that it is exploring opportunities in select Asian markets this year.

In order to do this, it has made a small acquisition of a Singapore-based company operating in Indonesia – EmpatKali. The company advised that it plans to leverage Tencent’s network and relationships to expand into these markets. Tencent is the owner of WeChat and a major Afterpay shareholder.

Is it too late to invest?

Although its shares are expensive, I still see value in them if you’re prepared to make a long term investment.

This is because I remain confident the company has the potential to become a giant of the payments industry over the next decade thanks to its first-mover advantage, strong market position, and popular brand.

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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.

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