Why the Afterpay (ASX:APT) share price has hit a new record high

One of the best performers on the S&P/ASX 200 Index (ASX: XJO) on Tuesday has been the Afterpay Ltd (ASX: APT) share price.

The payments company’s shares have continued their positive run and charged higher today.

In fact, at one stage the Afterpay share price was up 4.5% to a new record high of $96.08.

When its shares hit that level, it meant they were up an impressive 214% since the start of the year.

Why is the Afterpay share price at a record high?

There appears to be a few catalysts for Afterpay’s recent share price gains. These include a broker note out of Goldman Sachs, a quarterly update from rival Sezzle Inc (ASX: SZL), and a strong recovery by the Nasdaq index.

In respect to the latter, after a sharp pullback in September, the technology-centred Nasdaq index has been staging its recovery this month and now has its all-time high back in its sights.

This has given the local tech sector a big lift and helped drive tech shares higher. Incidentally, both NEXTDC Ltd (ASX: NXT) and Xero Limited (ASX: XRO) have reached record highs of their own today.

What about the broker note?

Last week Afterpay was the subject of a broker note out of Goldman Sachs.

Although the broker held firm with its neutral rating, its price target of $93.45 was around 17% higher than where its shares were trading at the time of release.

This, combined with some very positive comments by the broker, appears to have also boosted investor sentiment.

Goldman Sachs believes Afterpay had its strongest month of app downloads in history in the United States in September with approximately ~330,000 downloads. Based on this, the broker estimates that the company now has a user base of ~6.7 million in the country, which is up from 5.6 million at 30 June 2020.

Sezzle update.

Finally, an update by Sezzle last week confirmed that the buy now pay later industry is continuing to grow rapidly.

For the three months ended 30 September, Sezzle reported a massive 231.5% year on year increase in underlying merchant sales (UMS) to US$228 million (A$318 million).

This was driven by a 178.1% year on year increase in active customers to 1.79 million and a 178.3% lift in active merchants to 20,890.

Pleasingly, management also advised that “leading loss indicators have stabilized to better than pre-COVID levels.”

Is it too late to invest?

While Afterpay carries higher than normal risk due to its valuation, I still believe its shares offer value for long-term focused investors.

This is due to its leadership position in a rapidly growing industry and its international expansion plans. In light of this, I feel it could be a good idea to add Afterpay to a balanced portfolio today.

More reading

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• Why Afterpay, HUB24, NEXTDC, & Telstra shares are storming higher
• The Zip (ASX:Z1P) share price soars as Citigroup says 1Q update to surprise
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James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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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