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APT - Afterpay Limited

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Knobby22 said:
It is unusual for an Australian business to succeed on the world stage in this manner,
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They are making a loss.

It IS a hyped up business, its bubbly with FOMO, its tech, its a massive growth narrative, its perceived as being disruptive, its where the crowd is.

Maybe there is a great business in there, maybe what looks like priced for perfection and beyond will come to fruition, maybe the few contrarians like me will be wrong again.

My single real point at this time is that it's naive at best to claim this is a "fantastic buy and hold" at current prices. That was the claim I took issue with, and nothing you or anyone else has said has addressed that claim in any substantive or compelling way.
 
Knobby22 said:
What else do you want to know Ann? Don't get your question.
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Random comment Knobby, just as well ignored!

Knobby22 said:
I also think there is a good chance of a takeover from a big bank or MasterCard/Visa/Paypal.
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I reckon you are on the money here!

Knobby22 said:
I have owned CSL shares for many years and how many times have people said there overpriced? I just ignore them, growth is important.
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There are always going to be viruses. On the short term there could be a retrace as it has fallen under the 200dsma again after it recovered from the fall below in Nov and Dec. Buying opportunity perhaps? I bought these years ago for $2 eventually getting closed out for a darn good profit. If I had hung onto them, the profit would have been even better!

Knobby22 said:
That said, Afterpay investors should be prepared to sell if the price gets too frothy.
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Sounds like good advice for any stock (other than CSL perhaps).
 
Afterpay went though the $20 level pretty easy.
Usually whole numbers become a bit of a barrier and then a support level.
 
Livewire reports today
https://www.livewiremarkets.com/wires/afterpay-what-s-a-billion-dollar-revenue-line-worth


Afterpay: What's a billion-dollar revenue line worth?

David Allingham
Eley Griffiths Group

We acknowledge Afterpay (APT) has been one of the most talked about stocks in the Australian market. Everyone loves a 20 bagger - which is what Afterpay has been since IPO. Years of investing experience has taught us that such attention and investor enthusiasm often ends poorly for those who join ‘the party’ late. However, we still see significant upside in Afterpay over the next 3 years. Let’s take a look why.

In February, the company revealed a target Gross Merchandise Value (GMV) of $20B++ by FY2022 (see below).



Source: Afterpay 1H19 results presentation

This is an incredible target given:

  1. APT only did $2.3B of GMV in 1h19 and;
  2. Management's track record of exceeding expectations
Whilst APT hasn't broken-down the geographic split of this GMV target, our analysis would suggest it doesn't assume any contribution from the UK business. Perhaps the UK is the '++'?

Assuming a successful launch in the UK, the $20B GMV target could be significantly understated. This would see material upgrades to consensus GMV and customer numbers over the next 18 months. Indeed, we think it’s possible that the US business alone could generate close to $20b GMV by FY2022.

US business traction
The chart below highlights the US is scaling significantly faster than the Australian business did. We think the market is underestimating the implications this has for US GMV.





Source: Afterpay 1H19 results presentation



It is undeniable that the product is resonating with US millennials. One million customers have used the service within eleven months of launch and new customers grew at 4-5k per day in the first two months of the year. We think the US business has passed an inflection point, as the Australian business did, where the value of the product to merchants and consumers increases dramatically with user growth.

If it plays out like it did in Australia, customer growth could accelerate to 10k a day and beyond. This equates to ~3.5m new customers in the US over the next 12 months, a doubling of APT total customer base. To put it simply, the US is scaling roughly 5x faster than Australia, in a market >10x the size.

If we assume APT deliver $25B GMV at ~ 4% merchant fee, then APT will generate $1b of revenue.

APT has also guided to a 2% net transaction margin (NTM) on this revenue, implying $500m of NTM. Assuming $150m of corporate overheads would imply 350m profit before tax or NPAT of ~$250m. Given the growth profile, customer unit economics and global growth opportunity that APT will still have at this point, we would expect APT to trade on a PE of 30-40x. This would imply a market capitalisation of $7.5-$10B or $30-40 a share.

US investors are likely to be the marginal buyers of the stock and set the share price from here. Australian companies that have resonated with US investors have seen significant re-ratings e.g. Altium (ALU) and NextDC (NXT). US investors represent 30-40% of the NXT and ALU share registers. US investors only represent 15% of the APT register today.

What about the Australian business?
The Australian business has been somewhat overlooked in recent times. However, there has been some pleasing developments as the company has entered an optimisation phase here:

  • Gross losses have declined to 1.1% of underlying sales from 1.7% (outperforming most traditional credit products)
  • Growth in average customer spend per month has risen to $400 from $200
  • Percentage of customers transacting each month has doubled from ~20% to >40%
  • In store has grown from 9% of GMV in FY18 to 15% in 1h19 (outpacing online growth) and the market opportunity is 8x larger
  • NTM has expanded from 2.1% to 2.3%


Recent initiatives
Afterpay has also quietly undertaken the following initiatives recently:



  • Launched PLAY (with LayAway Travel), a new travel service with longer and more flexible instalment periods (2-12 months) and higher values. A move into the more traditional layby market.
  • Launched cross border transacting which will allow the large Australian customer base to transact with previously inaccessible US retailers via APT overtime.
  • Diversified beyond fashion into health, wellness and entertainment


These initiatives will continue to see demographics evolve beyond the millennial cohort and expand the addressable market. The Australian business also provides insight into the earnings potential for the US and the UK when they move into optimisation phase.



A note on the people
With assistance from Matrix Partners, Afterpay has recently hired:

  • Director of Engineering at Uber
  • Head of Risk Management at Uber
  • General Manager of ShopStyle
  • Head of Paypal UK


It is rare for an Australian company to attract the calibre of talent that APT has over the last 12 months. Shareholders should take comfort that APT has been building a world-class global team to optimise the company’s increasingly global footprint and deliver on the stated medium-term targets. It’s an endorsement of the product, the opportunity and senior executives/board.
 
Do others really think just posting articles with no analysis, research or commentary by the poster adds any value to the forum? This seems to becoming more common, members just copy and paste hype from brokers and others with no informed commentary at all.

Between that and the TA guys that just post endless charts it means the site is not exactly awash with useful discussion about investing in businesses!
 
galumay said:
Between that and the TA guys that just post endless charts it means the site is not exactly awash with useful discussion about investing in businesses!
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I see your point but in my view it's better to have a lively forum than to have a dead forum which ends up being no forum.

If someone looking at charts is seeing something to note then knowing about that can still be relevant to a fundamental investor as a trigger to research that stock. That way you've got your own research into the fundamentals with the added aspect that "person who's good with charts likes what they see" thrown in.

Likewise for those looking at charts well if someone's saying the fundamentals are turning around or there's a huge market for this product if the company can get it to work well that's a logical trigger to take a look at the chart. At least in my mind it certainly is.

Reaching similar conclusions from different approaches always gives me more confidence in anything. Likewise if they produce conflicting conclusions then that's a red flag as to what's really going on being perhaps more complex than it seems.

Just my
 
WorldPay has entered the Aussie market and with their financial muscle may squeeze the likes of AfterPay out of the market or severely cut their market share. Yet to establish widespread connections to Aust. businesses.
 
Well WorldPay is more direct pay rather than post pay so maybe not a threat to market share.
 
APT AFTERPAY up 40% for month!!

All time high today 23.490


852
 
galumay said:
Between that and the TA guys that just post endless charts it means the site is not exactly awash with useful discussion about investing in businesses!
Click to expand...

Perhaps learning a little about Charting would have you view
them very differently.
Take a look at the breakouts thread. Peter was all over this.

I cant see why you'd think that discussion wasn't useful.
 
So_Cynical said:
Me too - it really struggled to get thru 21
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If you look closely to the chart you'll notice that that struggle happens in a fairly tight range.
Struggles occur in all time frames and in all stocks. Eventually there are clear breakouts
OR Breakdowns. Once cleared you will generally find some good sized moves before another
struggle ensues.

If your going to exit in a long term struggle doing so at the top of the range is best
as you did.
 
The Age reports
https://www.theage.com.au/business/banking-and-finance/us-millennials-debt-fears-help-afterpay-beat-expectations-20190415-p51eef.html?promote_channel=edmail&mbnr=MzIxMDQyMQ&eid=email:nnn-13omn658-ret_newsl-membereng:nnn-04/11/2013-business_news_am-dom-business-nnn-age-u&campaign_code=13IBU020&et_bid=29174409&list_name=2033_age_busnews_am&instance=2019-04-15--20-44--UTC

US millennials' debt fears help Afterpay beat expectations

By Clancy Yeates
April 15, 2019 — 6.22pm

Afterpay co-founder Nick Molnar says the rollout of its buy now, pay later service in the United States has beaten the company's expectations, and is being helped by millennials' aversion to debt.

The payment firm, whose value has surged to $5.9 billion in the past year, launched in the world's biggest consumer market last May, and the sheer potential of the US has been one reason for investors' enthusiasm for the stock.

Mr Molnar, the chief executive who is also leading the expansion into the US, on Monday sounded an upbeat note on its US performance, which it has previously said was on track to have 1 million customers by March.

“It’s exceeded all of our expectations,” he said at a fintech conference called AltFi in Sydney.

Mr Molnar said it had been beneficial to launch Afterpay in Australia before going to the US, but it had been uncertain about whether consumers in the US would use it in the same way that they do here. However, Mr Molnar said its target market in the US had a "more pronounced" aversion to debt than millennial customers in Australia.

“You hear anecdotes that the US is a credit-driven society, and it’s kind of like ‘OK, we’re the opposite of that, are we going to get the same uptake?’"

"And actually, we’ve found that millennials have been even more pronounced in their aversion to traditional credit products, largely because of student debt, and it’s just a different landscape,” he said.

Buy now, pay later schemes — which have proven highly popular with millennials — allow customers to receive their goods before they have paid for them. Customers must pay for the goods in fortnightly instalments, but Afterpay is not considered a form of credit under the law because interest is not charged.

Mr Molnar pointed to the impact of the global financial crisis on attitudes to debt, saying he thought this phenomena had occurred around the world.

“In Australia there’s twice as many debit card transactions now than there are credit card transactions. In the US, two out of three people aged 18 to 30 actually don’t own a credit card anymore,” he said.

Mr Molnar was also questioned about his experience in raising money for the business from Australian venture capital (VC) funds. He said the smaller size of the local VC sector meant funds were "very focused on price".

Asked about its bad debt costs, Mr Molnar pointed to a 30 per cent reduction in its bad debt expense to 1.2 per cent of its book at its latest results, which was “materially lower” than traditional credit products.

Afterpay shares fell 1.2 per cent on Monday, and have soared from $5.62 this time last year to $24.99 in the past year.

Afterpay is the most high-profile firm among Australia's growing fintech industry, much of which is targeted at parts of the big banks.

At another session at the conference, co-CEO of business lender Judo Capital, Joseph Healy, said he expected the business to obtain a banking licence in the next week. Mr Healy, a former senior National Australia Bank executive, argued banks had "a lot of hard work to do over many, many, many years" to regain "a semblance of trust" among customers.

"We all know that trust arrives on the back of a tortoise and leaves on the back of a galloping horse. And it's not something that you can flick a switch and demand that it's reinstated," he said.



All time high and included in my tips for 2019 Year Comp




417
 

Funny, probably because millennial's are tapped out on student debt and are not credit worthy for traditional credit products, Afterpay comes along and accepts them.

The whole thing rhymes like a ponzi, but is a good example of just following what the chart shows.
 
No, the opposite, the millennials are weary of credit traps and so prefer Afterpay.
 
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