Afterpay and Zip share prices rise as tech optimism returns

Afterpay, Zip share price in focus

No news, is good news, right?

Investors piled back into Afterpay and Zip) during Friday's morning session, with the stocks up 6.17% and 7.83%, respectively.

Overnight the tech-heavy Nasdaq 100 was up 1.29%, and the US-focused Buy Now Pay Later company Affirm, rose 2.94%.

The same beats that journalists are seemingly in a perpetual cycle of covering were attributed to this run: tech stocks were up because the market expected a faster economic recovery, but they also managed to ‘shrug off’ the Federal Reserve’s hawkish messaging, according to Reuters.

This comes after the Fed indicated that rates could be raised as soon as 2023. That was ahead of the Fed’s previous comments which suggested rates wouldn’t be raised until 2024.

The Fed also increased its inflation expectations for the full-year.

Australia, as is has the proclivity to do, mirrored those US market moves: by 11:16 the ASX All Tech Index was up an astounding 3.51% to 2,971 points.

But Afterpay and Zip themselves have released no news or update that may have caused this spike. Just general tech optimism it seems.

Morgan Stanley did release a new research note on Afterpay (which we will look at below), but even with that, the broker was merely reiterating its last price target ($145 per share); which, might I add, it had been in a process of successively lowering since February.

Sezzle also saw its share price rise during Friday’s morning session, though to a less pronounced degree than Afterpay or Zip.

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Morgan Stanley’s $145 Afterpay PT

Storied investment bank Morgan Stanley this week reiterated their $145 price target (PT) and Overweight rating on Afterpay.

Here were the key points from that report:

• Afterpay Money, once up and running, could eventually help the company more than double its Australian revenues. Tangibly, the investment bank models the Afterpay Money uplift potential in Australia to $167 million in FY23, $359 million in FY24 and $589 million in FY25.
• Strongly aligned with Afterpay’s customer-centric focus, Morgan Stanley says it sees 'cashback as the most promising new segment'. By FY25 analysts think Australian cashback commissions could hit $136 million.
• Beyond its potential positive impact on the top-line, Afterpay Money could also help the company boost engagement, reduce processing costs, and provide the company with more granular data on its customers.
• More broadly, the company remains well placed to benefit from the structure shift from credit to debit, with the investment bank estimating an 11% debit purchase value CAGR between 2020 and 2025.