The Motley Fool

How the Afterpay share price has soared 60% higher in 2019 so far

The Afterpay Touch Group Ltd (ASX: APT) share price has been a treasure chest for growth investors in 2018. What started out as a generational shift from credit cards to debit cards, has become what we now know as one of Australia’s most innovative startups.

Afterpay has been aggressively expanding across different industries in Australia and rocketed into the US mid last year. Since the beginning of 2019, the APT share price has shot up by an attractive 62% to its current trading price of $20.19.

Who is Afterpay?

Most readers would by now be aware that Afterpay offers a buy-now, pay-later product that emerged in the Australian market in 2017. It allows users to pay for purchases over four instalments interest-free. The only fees incurred are for late payers.

Users of its service are obsessed, with 90% of transactions coming from repeat customers. Afterpay social media accounts boast tens of thousands of followers and likes with people proclaiming their love of Afterpay, even going as far as creating groups for specific retailers’ people want on board.

In 2018, the company was processing 10% of all online retail payments, and over 25% of all online beauty and fashion transactions with 69% of customers between 18-35 years old.

Afterpay has expanded beyond these sectors to service dentistry, radiology (soon) and even travel – think Jetstar flights and LayAway travel for booking international travel experiences.

Through all eyes were on Afterpay during the ASIC review into buy-now, pay-later schemes, that wasn’t enough to ease its rocketing power. Afterpay’s share price propped right back up post-Christmas shopping period, with strong results from its launch in the US sending positive messages to investors. It’s on track to hit 1 million active users and 2,000 active merchants by the end of March, with a UK Launch expected in the second half of the year.

Foolish Takeaway

Afterpay posted its half-year results on February 20. Revenue shot up 91% to 116.1 million, active users and merchants on the platform more than doubled over the year, reaching numbers of 3.1 million and 23,200 respectively. Also, late fee income as a proportion of revenue is down 4.9% to 17.6%, lessening the pressure of Afterpay being labelled as profiting from vulnerable consumers.

These stellar results were driven by its international expansion in the US. This demonstrates that Afterpay is capable of scaling aggressively while keeping bad debts low and net-margins stable.

Afterpay’s price to sales ratio is a staggering 30.16 over the last 12 months, the highest amongst its WAAAX peers. However, with such great success in the US to date, I reckon there’s only going up from here.

In with the Afterpay shares and out with the smashed avocados!

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Motley Fool contributor Audrey Thehamihardja owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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