I have been raving about this outstanding company all of 2019. As well as delivering stunning short-term returns, Afterpay Touch Group Ltd (ASX: APT) has a clear pathway to success and no threatening headwinds in its way.
If you've been watching WAAAX share prices this year, you'll know that almost all of these companies have far outshone the ASX200. In particular, the Afterpay share price has been a standout. If you have an appetite for risk, then I'd take another look at Afterpay shares, despite currently trading near its all-time high.
Why am I bullish on Afterpay?
The Afterpay share price closed at $23.31 on Wednesday afternoon. If you had invested exactly a year ago when it's share price was just $6, you would be 288% wealthier today. Besides some regulatory stumbles at the tail end of 2018, the innovative fintech company continues to impress.
A key metric to reflect product success for Afterpay is the total value of sales processed through its buy-now pay-later product. In the company's HY report released in February, this value tripled to $2.3 billion. Afterpay also doubled its number of active users to 3.5 million and active merchants to 23,200. As of today, it has signed around 25,300 businesses.
Afterpay has expanded its retail verticals to include healthcare and experiences in Australia and now processes over 10% of all transactions. To top it off, it's recent US launch is attracting growth north of 40% in the two months since Christmas. According to a Goldman Sachs analyst, the US target market for Afterpay is 15x Australia, and already, growth in the few months has exceeded the pace in Australia.
Similarly, Urban Outfitters has agreed to be Afterpay's launch partner in the UK, ensuring a smooth entrance into London and Manchester in the middle of this year. This is a very positive sign, highlighting that retailers enjoy the value created by integrating the buy-now-pay-later platform into its payment processes.
Foolish Takeaway
These metrics have blown the hat off investors, but does it still have more fuel to burn? Bell Potter analysts released a sector view two weeks ago and set Afterpay's share price target at $28.02, meaning there's still room for growth.
Bell Potter expected Afterpay to grow sales to $210.7 million and EBITDA to $14 million at FY. These figures are expected to expand to $641.9 million and $114.1 million respectively in just two years. This means Afterpay is trading at 82x FY21's estimated earnings.
Though this may sound expensive, I believe offering Afterpay as a payment option is the new normal for retailers, not a competitive advantage. In this light, I'm anticipating strong growth rates across new markets and FY results that will beat analyst expectations.
