This morning. buy-now-pay-later challenger Splitit Ltd (ASX: SPT) posted an operating cash loss of US$2.54 million on revenues of US$322,000 for the quarter ending March 31 2019.
The company had US$6.5 million cash on hand at March quarter end after its January 2019 initial public offering saw it raise A$12 million and triggered an outrageous share price surge from 20 cents to $2 per share in under a couple of months.
This morning Splitit shares change hands for 92.5 cents with the wild volatility suggesting the stock is something of a day trader's playground, while its market value sits around $243 million based on 173 million shares on issue and another 90 million in escrow.
Over the quarter Splitit reported it added 57 new retailers to take its total to 437, with 160,000 shoppers signed up to the platform at quarter end. These are hardly the kind of numbers to have AfterPay Touch Group Ltd (ASX: APT) or ZIP Co. Ltd (ASX: Z1P) quaking in their boots.
AfterPay for example posted total income of $116.1 million for the half year ending December 31 2018 and already has well over 25,000 retailers signed up and reportedly added some 7,000 new customers per day over the March quarter.
While Splitit's balance sheet now also looks an issue given its cash burn rate and it'll likely be tempted to go back to the market for more capital in the future. To be fair you could hardly blame them for seeking more cash given the wild enthusiasm of some ASX participants for anything in the buy-now-pay-later sector.
Outlook
Given the growth rates (57 merchants signed up in 3 months), cash flows, and valuation you can probably conclude there's zero chance I'm a buyer of Splitit shares.
In the sector the one business to own is AfterPay, however, I've written previously that I'd rate it a hold on today's valuation around $23.40 a share given the strong growth expectations now baked into its valuation.
