Higher and higher for Afterpay as Citi doubles target price

Afterpay shares have hit yet another record after Citi increased its price target by a whopping 137 per cent.

Citi analyst Siraj Ahmed boosted his 12-month target to $64.25 a share.

Afterpay shares hit yet another record on Thursday, after investment bank Citi increased its price target by a whopping 137 per cent, putting the payments play firmly in the ranks of a top 20 ASX stock.

The “buy now, pay later” market darling was the best performing stock last quarter and is showing no signs of slowing down, and is now worth $18.27bn after climbing another 9.51 per cent to $68.16 per share. At the intraday high of $68.62 Afterpay was trading 700 per cent higher than what it traded in the depths of the market selldown in March.

Citi analyst Siraj Ahmed boosted his 12-month target to $64.25 a share, up from $27.10 previously.

“We see Afterpay as a beneficiary of the accelerated shift to e-commerce and expect the narrative/trends to be positive over the next few months driven by increasing consumer usage (especially in the US), launch of instore in the US and launch into Canada,” he said.

“We are cautious on the outlook for consumer discretionary spend and bad debts when fiscal stimulus measures end.”

He added that while the US market was still a battleground and there was no clear winner, Citi‘s analysis indicated that Afterpay and Klarna had the lead in terms of customers while Sezzle and Afterpay were in the lead in terms of integrated merchants.

“We see Afterpay as a two-sided network that benefits both merchants and consumers and believe it offers merchants more than just a payment option and see it also as a demand generator/marketing platform,” he said.

The lift reflects a 70 per cent rise in Citi‘s financial year 2022 earnings estimate, a 40 per cent rise in peer multiples, and rollover of the broker’s relative valuation to reflect the opportunity from new markets and new avenues of monetisation.

There remains a massive divergence between Afterpay’s share price and Bloomberg’s consensus price target of $42.59. However, the massive price target boost from Citi is highly unusual.

Citi had previously downgraded Afterpay in April, predicting weak consumer discretionary spend.

Afterpay was the hottest stock in the ASX200 last quarter with a 231 per cent rise.

As The Australian first reported this week, the tech company created a new role of global chief strategy officer to mine the wealth of data flowing from its millions of shoppers and merchants.

And Afterpay last month announced that Clearpay, part of its instalments payments business, had reached more than one million active shoppers in Britain. This had been achieved after launching in Britain just one year ago — making Clearpay one of the fastest-growing e-commerce payment companies in the European market.

Thursday‘s boon is the latest in a string for the red-hot BNPL sector. Afterpay rival SplitIt last month more than doubled in valuation, soaring 108 per cent on the back of a Mastercard deal.

Meanwhile Afterpay said COVID-19 had been a boon for its business.

A 32 per cent decline in cash usage during COVID-19 has meant more customers were turning to instalment payments, the company said.

BNPL providers have largely avoided heavy-handed regulation.