Afterpay and Zip hit all-time highs as the ASX 200 rises 1.83%

ASX 200 continues to rally

The rise, fall and subsequent rebound of Zip (Z1P) and Afterpay (APT) looks to be emblematic of the recent broad market trends and sentiment shifts.

The ASX 200 – which has been bolstered in recent weeks by a surge in financial and materials stocks – now trades well off the low it recorded on 23 March. Indeed, the panic that brought global markets to their knees, which saw some call for markets to be shut down on the basis that they had become ‘disorderly’ – have since vanished. Such slogans, apparently only apply to falling markets.

Aptly, as Jim Paulsen put it to CNBC yesterday and speaking of US market dynamics, 'Despite several issues of importance – national riots, Chinese relations, an ongoing pandemic – the stock market is primarily focused on a single thing: the restart of U.S. and global economic activities.'

Importantly, though Australian stocks may be up, broader macro issues continue to loom large: trade tensions still simmer with China, and today it was revealed that Australia’s GDP contracted by 0.3% in the March quarter.

Looking forward, Treasurer Josh Frydenberg said forecasts suggest that Australia’s GDP will also likely contract in the June quarter – which would imply that the country is in/ heading for, a technical recession.

The ASX 200 closed out Wednesday's session up 106 points or 1.83%, to 5,941.

Afterpay and Zip share prices continue to rally

Against this backdrop – Australia’s buy now pay later darlings have staged a staggering comeback of their own.

Looking back, at the close of market on 23 March, APT traded at just $8.900 per share, while Z1P traded hands at just $1.225 per share.

By 2:20PM on 3 June, Afterpay (APT) was trading at $51.83 per share, and Zip (Z1P) at $6.23 per share – implying respective moves from that 23 March close of 482% and 408%.

Looking at what drove these gains, Zip’s stock surged on Tuesday and Wednesday, after the company announced that it would be acquiring US-based fintech QuadPay and raising $200 million through the issuance of convertible notes and warrants.

We examine Zip’s QuadPay acquisition and raise in depth here.

In response to that news, UBS put Zip’s price target and rating under review. UBS currently has a Buy rating and a $3.70 price target on Zip.

Z1P hit an all-time high of $6.790 on 3 June.

The investment bank aptly described the above as a complex deal and noted although QuadPay boasted a number of favourable characteristics, ‘Further clarification is required on QuadPay's economics: while margins are higher than those of APT, will this be sustainable if/as QuadPay scales, particularly for affiliate revenues? Further, the material increase in share count from the acquisition/raising is dilutive for existing shareholders.’

Afterpay, by comparison to Zip, has made no spectacular acquisition announcements in the last few months, though continued to do what it seemingly does best: grow.

The pandemic and all the problems one would think would come with a pandemic seemed to do little to damper Afterpay’s growth metrics, its appetite to expand, or maybe most importantly, investors’ demand for its stock.

APT hit an all-time high of $52.290 on 3 June.

How to trade BNPL stocks

What do you think: have Australia’s premier buy now pay later stocks run too hard or will they continue to rise? Trade accordingly. For example, you can trade Afterpay shares – both LONG and SHORT – through IG’s world-class trading platform now.

To buy (long) or sell (short) Afterpay with CFDs, follow these simple steps:

1. Create an IG Trading Account or log in to your existing account
2. Enter ‘Afterpay’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade