The Afterpay Touch Group Ltd (ASX: APT) share price has jumped 2.36% higher in early trade today, reaching $13.89 as strong technology performance on Wall Street looks set to pull Australian fintech higher.
Overnight in US trade, Netflix announced a 13-18% fee increase for its US subscribers and investors responded well, lifting the stock 6.5% higher at close. Australian fintech is highly correlated to the performance of US technology and today is no exception, with a number of domestic tech stocks up in early trade including Appen Limited (ASX: APX) and WiseTech Global Limited (ASX: WTC).
Afterpay was a standout performer in 2018 as it rocketed from $6.26 to a high of $21.3 in August, before settling up a relatively meagre 91% at $12.00. The company expanded rapidly and boasted impressive sales results in Australia and the US, whilst investors were also receptive to the company’s planned UK expansion.
Today’s sharp move in early trade continues Afterpay’s strong start to the year. The APT share price is up 14% since the start of January, to reach its highest share price since December 2018 as investors brushed off concerns of a “buy now, pay later” Senate inquiry and fears of a regulatory crackdown by the ACCC on the service. Whilst consumer groups continue to warn of the “dangers” of Afterpay’s business model as a quasi-credit lender, it looks like these headwinds are beginning to subside.
Afterpay is due to release its half-year results in mid-February and one would be foolish to think that they will not post another bumper sales result having signed some major retail contracts in the US in the last quarter.
There is little doubt that the “buy now, pay later” business model utilised by Afterpay has proved to be a success, and recent shakiness in the banking sector has pushed more consumers towards this corner of personal finance providers. However, given the lofty valuations of the stock, I believe investors might find better value in key competitor Zip Co Ltd (ASX: Z1P) which also charged 3.3% higher in early trade today, or fellow fintech Pushpay Holdings Ltd (ASX: PPH) from a pure value perspective.
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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, PUSHPAY FPO NZX, and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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