Afterpay (APT) received good news this morning regarding the investigation into its practices from AUSTRAC, while another broker upgraded the price target on the stock...
APT released a quarterly update which comes as the stock is within roughly 10% of its all-time highs set a few days ago. APT doesn’t provide short-term guidance but rather long-term aspirational targets, but the released numbers paint the picture of a business that is still early in its growth runway which bodes well for future share price growth. Rather than go through everything, I will list the main takeaways below:
- Annualised run-rate now at $16.4bn – it seems a long time ago that APT’s 2023 target transaction value was $20bn which seems like it will be eclipsed by the end of this financial year.
- Margins and net losses remain at sensational and better-than-historical levels, which is interesting as stimulus starts to slow down in the US and Australia.
- 15% customer growth in Australia and New Zealand (not a huge surprise as these markets are more mature and are already 3.4 million), but a 63% increase in underlying sales. This demonstrates the increased rate of usage over time which is a good indicator of how the product resonates with its customers.
- Growth in US customers of 175% from the same time last year and a 229% increase in underlying sales. Interestingly, customers in the US now stand at 6.5 million, but with 3.4 million in ANZ and the population in the US roughly 13 times larger (ignoring the higher e-commerce rates in the US), an equivalent market penetration in the US would be 44 million customers!!!
The stock has bounced a bit this morning in a weak market, and although the stock continues to look expensive on a short-term basis the opportunity ahead remains gargantuan and with a pathway to $100bn in annual transaction value in a few years and margins of 2.25% in the current environment, one can see why the upside for the share price is exciting if the company fulfills on its potential.
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