Why the Afterpay share price surged 4.5% yesterday

The Afterpay Touch Group Ltd (ASX: APT) share price surged 4.54% higher on the ASX as it bounced back from an 11% decline on Tuesday following its half-year earnings release.

What’s the latest from Afterpay?

The company has launched a partnership with LayAway Travel, called PLAY, that allows users to “book now, pay later” and pay via weekly or fortnightly instalments prior to going on holidays. While the Afterpay system requires repayment within 8 weeks, the PLAY system will afford travellers between 3 and 12 months to pay the full amount of their booking.

Afterpay has looked to diversify its earnings streams since it started out as primarily a fashion and cosmetics business targeting 18-35-year-old females in its early days. The new PLAY venture is also not the first time Afterpay has dabbled in travel, after it announced a partnership with Jetstar in late 2018 on a trial basis to allow travellers to Afterpay their flights with the budget airline.

What happened in its half-year results?

Afterpay reported underlying sales up 147% on prior corresponding period (pcp) to $2.3 billion and total income up 91% on pcp to $116.1 million.

The strong sales result has been buoyed by the company’s foray into the lucrative USA market throughout the half and appears to be paying dividends for the company so far. The company said it is on track to have over 1 million active users and 2,000 active merchants in the USA by the end of March 2019, while it is planning on launching in the UK in 2H19.

On a pro-forma basis, the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) rose 19% to $17 million while the company maintained its loss-making status, reporting a net loss after tax to $22 million.

Foolish Takeaway

Afterpay’s share price went bananas in 2018, increasing 200% throughout the year to be a top performer within the S&P/ASX200 Index (ASX: XJO). I think there’s still some gems in the Information Technology space such as Altium Limited (ASX: ALU) even if you’ve missed the boat on Afterpay, while Fools could also check out these top growth shares that have been tipped as market beaters.

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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 and Altium. 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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