The Afterpay Ltd (ASX: APT) share price has been dominating headlines this week (more so than usual, that is).
The buy now, pay later market darling delivered a jam-packed announcement on Tuesday, in which it detailed an $800 million capital raising, Q4 FY20 trading update, and co-founder sell-down.
Yesterday, Afterpay announced the successful completion of the institutional component of its capital raising. The company raised $650 million at a placement price of $66 per share, which represented a 2.9% discount to Afterpay’s last closing price of $68.
Meanwhile, co-founders Anthony Eisen and Nick Molnar sold 2.05 million shares each (10% of their respective holdings) at $66, meaning the pair pocketed a combined $270 million from the sale.
Investors got a chance to react to the news when Afterpay shares resumed trading yesterday. Coincidentally, the Afterpay share price closed at exactly $66 (2.9% lower for the day), in line with the placement price.
Today’s trading, however, is a completely different story. After opening 3% higher this morning, Afterpay shares have run out to a sizeable 11% gain at the time of writing – with shares last changing hands at $73.32 apiece.
Why the Afterpay share price is defying gravity
The S&P/ASX 200 (INDEXASX: XJO) is rebounding today, up nearly 1% in early afternoon trade, which is likely adding to the positive sentiment.
However, the catalyst for today’s jump appears to be a bullish broker note from investment bank Morgan Stanley. According to reporting in The Australian Financial Review (AFR), the broker dramatically increased its price target for Afterpay shares in a note to clients on Wednesday evening.
Morgan Stanley is tipping Afterpay shares to hit $101, up from a previous price target of just $36, because the company has been “demonstrating better-than-expected credit quality control, while accelerating sales growth and diversifying away from the fashion category”.
“We thought that APT was seeing more customer usage and better prospects on credit quality during the June quarter, but the latest earnings pre-release showed both trends are much stronger than we expected,” the AFR quoted Morgan Stanley as stating.
A triple-digit Afterpay share price might be a lot to get your head around, especially considering this is a company that plummetted all the way to $8.01 in March. But if you thought $101 was inconceivable, it’s nothing compared to Morgan Stanley’s bull case, which sees shares hitting $242.80.
According to the AFR, Morgan Stanley is the first broker to crack the $100 price target range for the market darling. Bell Potter is next, recently lifting its price target from $68 to $81.25.
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