Afterpay (ASX:APT) is the buy-now-pay-later (BNPL) giant of Australia, that has revolutionized the payment industry. In the past 12-months APT has more than doubled shareholder’s money, up over 110%. Were you onboard?
Since listing in 2016, Afterpay has risen from its initial $1 share price to heights of $160.05. Is APT a good stock to buy in 2021? Should I buy APT shares? and how much are Afterpay shares worth?
In fact, if you had brought 1000 shares in Afterpay after listing on the ASX in 2017, at the time worth $2,700, would now be worth a breathtaking $84,000. That’s a jump of over 3,000%
Afterpay: The BNPL Giant
In terms of market Cap, there is no question that Afterpay shares trump the entire Buy-Now Pay-Later sector. Afterpay is 558% larger than the next BNPL leader: Zip Pay. In fact, APT makes up 80% of the Australian BNPL sector in terms of market capitalization.
About Afterpay Limited
Afterpay is a ‘buy now, pay later’ platform that lets you buy something immediately, and pay it off in four installments.
Founded five years ago in Sydney, Australia, Afterpay has millions of global customers and tens of thousands of merchant partners now using the platform globally across Australia, US, Canada, UK (where it is called Clearpay), and New Zealand. Afterpay’s global team is currently made up of more than 700 people and growing.
Afterpay’s business model is completely free for customers who pay on time. Rather APT makes money by charging retailers fees for offering the service, and by charging customers late fees.
Afterpay’s Initial Public offering in 2015 was at just $1 per share, so how much are Afterpay shares worth today? Is APT a good sock to buy?
How Much are Afterpay Shares Worth: Current Price
At the beginning of the year, APT reached an all-time high of $160.50 on February 21st. Today the Afterpay share price is $86.52, which is in the middle of its 52-week range of 41.50-160.50. The current share price is down 46% from Afterpay’s all-time high.
How Much are Afterpay Shares Worth: Growth of The BNPL Sector
Australians Buy-Now Pay-Later, point of sales credit sector has grown rapidly in recent years. The ease of access has also led to criticism of their lending practices, mainly from customers being charged heavy late fees. So far Afterpay has avoided regulation from the Australian National Consumer Credit Protection Act of 2009. This has largely helped its growth.
It’s no question the entire BNPL sector has had massive growth and wide-scale adoption. BNPL accounted for 10% of all e-commerce transactions in Australia in 2020, growing largely at the expense of credit cards, bank transfers, and prepaid cards.
The number of open BNPL accounts has climbed to 6.1 million by June 2019, representing 30% of the nation’s adult population. Between 2017 and 2019 the number of buy-now-pay-later transactions increased from 16.8 million to 32.0 million, an increase of 90%. Source: SPGlobal.
Should I Buy APT Shares: Investor Sentiment
After surveying 889 Investors about their current APT sentiment: BUY-HOLD-SELL as well as their target price over the next 12-months here are the results;
The results from this survey show there is currently strong sentiment favoring a BUY on the APT share price, with an average price target of $109.75 over the next 12-months. So how much are Afterpay shares worth? Let’s get into it.
How Much Are Afterpay Shares Worth: Fundamental Analysis
Afterpay released its half-yearly report in February. Afterpay limited shares Global Underlying Sales for H1 FY21 was $9.8 Billion, 106% higher than the prior corresponding period. This growth was driven by strong Underlying Sales across all regions, particularly North America and the United Kingdom.
Afterpay active customers have reached 13.1 million (up 80%) with active customers in North America exceeding 8 million (up 127%). Making North America APT’s largest customer base.
“Based on Q3 FY21 performance, North America is now the largest contributor to underlying sales and outperformed the seasonally strong Q2 FY21 on a local currency basis”.
Despite Afterpays massive continued growth they still reported an after-tax loss of $79.2 Million.
Afterpay’s balance sheet remains strong with over $1.7b of pro-forma liquidity and growth capacity as at 31 December 2020. This position can facilitate several years of self-sustaining high growth in Underlying Sales.
Here’s a breakdown of the detailed fundamentals;
|Price to sales||37.47||15.99||13.44||18.34|
|Debt to equity||7.08||-1.45||1.451||-2.9||1.18|
It’s no surprise that by all typical quantitative measures APT is overvalued. One of the flaws of fundamental analysis, is that loss-making growth companies are overlooked. To mitigate this we can compare Afterpay’s metrics to similar companies in the BNPL space.
We can see from these metrics Afterpay still seems overvalued in relation to its peers. One positive is their massive amount of liquid assets and a small amount of debt.
We can see from the graph Afterpay is very similar in scale to US BNPL giant, Affirm. Comparing these financials it’s surprising how similar these companies are. Keeping in mind Affirm is given as USD, and APT is AUD. APT is trading at a premium to Affirm in market cap. If you’re interested in Affirm check out this article.
How Much Are Afterpay Shares Worth: Technical Analysis
In summary, the downside is likely to prevail to a target of $70. The alternative scenario is that a downside breakout of $99 would call for $110 and $119.
Here’s a breakdown of the detailed Technical Factors;
Should I Buy APT Shares: Future Prospects
Afterpay has a special place in our hearts, being my first ever trade back in 2017. Since then Afterpay shares have come a long way and the company continues to make excellent progress.
Afterpay is in a strong capital position to fund future growth. Afterpay’s overseas expansion has shown excellent growth potential and is still in very early stages with plenty of growth in store.
Afterpay has a number of projects in place including the recently launched partnership with global payments platform Adyen, meaning all merchants that use Adyen can now offer Afterpay.
E-commerce sales have exploded for Afterpay. In-store sales are expected to further accelerate following the launch of the Afterpay Card (28th March). Allowing customers to checkout in-store at any Afterpay merchant by simply tapping on the payment terminal.
The biggest upcoming price catalyst for Afterpay is their potential US listing. Moving to the US will significantly improve APT’s access to capital and help facilitate the massive expansion of the BNPL giant onto global scales we have never seen.
The US in fact became the first region for the company to record $1 Billion dollars in sales in a single month. with the company stating:
“Afterpay is currently working with external advisers to explore the options for a US listing given the US market is now the strongest contributor to our business and is expected to continue to grow strongly.”.
Check out our thoughts of Afterpays’ move and what this means for investors here.
Should I Buy APT Shares: Prophet’s Take
Afterpay shares have made us massive returns when we first picked them up in 2017 at around $4.50 per share. At the time of writing, Afterpay is not part of our portfolio. Afterpay is a stock that relies heavily on momentum. We are keeping a close eye on Afterpay and we will consider a BUYING when momentum returns.
Please Remember all Articles Published on Prophet Invest are Opinion only
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