The Afterpay Touch Group Ltd (ASX: APT) share price is on course to finish the week with a bang following the release of a business update this morning.
In early trade the payment solutions company’s shares are up 10% to $15.68.
What was in the update?
In the first half of FY 2019 the company’s strong underlying growth and performance continued.
Underlying sales in the first half came in at over $2.2 billion, up 140% on the prior corresponding period. Playing a big role in this strong growth was the company’s performance in December, which was the largest on record for the Afterpay platform.
The main driver was the company’s Australian & New Zealand operations. Approximately $2 billion in total underlying sales were processed through the Afterpay platform in the first half, which is double the prior corresponding period.
Its ANZ holiday season underlying sales performance was particularly strong, with a significant uplift and contribution from Afterpay’s larger merchant partners.
The U.S. business also continued its strong form, processing $260 million of underlying sales in the first half. This compares to over $115 million of underlying sales at the end of October.
Its expansion into the United States means that there are now over 23,000 merchants that have transacted with Afterpay globally over the last 12 months.
Management advised that there are now over 3.1 million active customers using the Afterpay platform, up from 2.8 million at the end of October. Customer numbers grew at an impressive 7,500 new customers per day during the second quarter.
Pleasingly, thanks to scale benefits and its investment in risk management capabilities and processes, Afterpay has reduced its gross losses while also reducing late fees. Late fees as a percentage of total Afterpay income are estimated to have declined to below 20% in the first half.
Another positive is that despite the reduction in late fees, it has maintained its Net Transaction Loss (NTL) performance. NTL in the first half was broadly in line with the prior corresponding period and is estimated to be at the lower end of its target range of 0.6% – 1.0%.
Should you invest?
All in all, I believe it would be a great buy and hold investment. However, due to the enormous amount of future growth that has already been built into its share price, it is certainly a high risk one and suitable only for those with a high tolerance for risk.
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Returns as of 6th October 2020
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Appen Ltd. 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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