The share price of ‘buy now, pay later’ (BNPL) giant Afterpay Ltd [ASX:APT] has spiked today after its share price target was lifted from $120 to $136 per share.
The move comes as the BNPL trend continues to build momentum across the globe in wake of the pandemic, potentially spelling the end for tradition credit, such as credit cards.
At the time of writing the APT share price is up $9.49, or 8.61%, to trade at $119.75 per share.
Afterpay expected to become global BNPL
Today’s share price action comes after investment bank Morgan Stanley lifted its price target on APT to $136 per share.
The bank said it expects strong revenue growth from the company as its BNPL platform is rolled out globally.
Three Innovative Fintech Stocks to Watch Now. Discover more.
Morgan Stanley also lifted its revenue forecasts by 2% to 6% for 2022 and 2023, with its earnings estimates for 2021 and 2022 lifted by 30% and 20% respectively.
APT is forecast to clock up 13.6 million active customers in its half-year results based on the surge in app downloads in the US and UK in late 2020.
The bank also said it expects first-half gross merchandise value of $9.9 billion and revenue of $455 million.
That puts its merchandise value forecast 5% ahead of consensus estimates, and revenue forecast 10% ahead of consensus.
So, why is the broker so confident on APT?
In my opinion, it boils down to two things.
One, APT is well-placed to become a global BNPL platform.
Given its relevance in several geographies, high repeat customer usage, and best in class sales referral generation for merchants, there’s a bit to like from an investor’s standpoint.
Two, the structural shift away from credit to debit card usage, with BNPL companies snatching market share from traditional payment providers.
Like it or not, the BNPL trend is here to stay and will continue to be a major platform for commerce.
Should you still be buying Afterpay shares?
Remember, this is just the view of some analysts at one brokerage firm.
There is no guarantee APT shares will reach Morgan Stanley’s price target.
But it is a vote of confidence in the company.
Do a bit of digging and you can probably find a decent amount of people with a negative outlook on the company.
It comes down to how you form YOUR opinion.
If you decide Afterpay is a bit too rich for your blood, check out our report on three new small-cap fintechs with exciting growth potential. In it we’ll run you through three promising Aussie companies that are currently trading below $1 but could soon be worth much more. Click here to learn more.
For Money Morning