As leading fund manager says sector looks like a bubble, the share price of leading buy now pay later player Afterpay hits another record high

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    The Afterpay (APT) share price has jumped another $3.67 higher to trade at $65.91 despite a leading fund manager saying the buy now pay later sector has stretched valuations and lack of profits that are reminiscent of the tech bubble of the early 2000s.

    According to an AFR article, Investors Mutual is avoiding the sector, with senior portfolio manager Simon Conn saying his firm has seen an increased level of retail investor activity in the market “and there’s not a lot of fundamental analysis going on but a lot of momentum.”

    After hitting a low of close to $8 at the height of the March share market sell-off, the Afterpay share price has soared over 700% higher as it has benefitted from the shift to digital payments.

    Mr Conn said the buy now pay later sector has “extreme valuations” and a lot of risk. Fellow portfolio manager Marc Whittaker said Investors Mutual were looking to build portfolios of resilience and quality, with balance sheet being one of the key factors.

    Last month a broker note out of Bell Potter said it believes that integrating the Afterpay platform with key ecommerce and payment infrastructure players will be key drivers of underlying sales growth in the future.

    Bell Potter also saw opportunities for Afterpay and WeChat owner Tencent Holdings to collaborate over the medium term.

    While Afterpay shares were trading at a significant premium to the market average, Bell Potter noted at the time that it traded on lower multiples than sector peer Shopify. This is despite it having double the sales growth trajectory of the Canadian ecommerce giant.

    Disclosure: Author Bruce Jackson has an interest in Afterpay shares.

     
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    Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au