Afterpay share price lower despite strong business update

The Afterpay Touch Group Ltd (ASX:APT) share price has bounced around after providing a very positive business update this morning…

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The Afterpay Touch Group Ltd (ASX: APT) share price has bounced around this morning following the release of a business update.

At the time of writing the payments company's shares have dropped 2% lower to $23.36, having been as much as 5% higher at once stage.

What was in the update?

Afterpay Touch has continued its strong performance since its last update and reported unaudited underlying sales of approximately $4.7 billion for the 11 months to May 31 2019.

This is an increase of 143% on the prior comparable period and roughly in line with the growth rate achieved in the first half of the financial year.

At the end of the period there were over 4.3 million active customers transacting with Afterpay. This is an increase of 38.7% since the end of December, which represents the addition of an average of approximately 7,900 new customers per day over the period.

Similarly strong growth has been exhibited on the merchant side of the business. At the end of May Afterpay had partnered with approximately 30,600 active merchants, up 7,400 or 32% since the end of December.

Two more key metrics that get a lot of attention are its Gross Loss, Net Transaction Loss (NTL) and Net Transaction Margin (NTM).

Despite the increasing contribution to underlying sales from international markets, these have been maintained and are broadly in line with what was achieved in the first half of FY 2019.

U.S. update.

As the company revealed yesterday, Afterpay now has over 1.5 million active customers who are able to shop with over 3,300 active merchants as at the end of May. There are a further 1,100 merchants in the process of integrating with the platform.

This led to the company's U.S. operations reporting underlying sales of approximately $780 million for the 11 months. But based on annualising the May trading numbers, the US business is now generating approximately $1.7 billion in annualised underlying sales.

Management also advised that its NTM is increasing month on month, driven by a combination of improving Afterpay merchant fee income and stabilising losses as the business scales.

UK update.

Afterpay has successfully completed a soft test in the UK market and is now live and transacting under the Clearpay name.

Early engagement has been positive across the company's initial target market with over 50 retailers in varying stages of integration. Partnerships include a mix of well recognised UK, U.S., and Australian based retailers.

ANZ update.

There are currently over 2.7 million active customers in Australia and New Zealand who are now able to shop at approximately 27,300 merchants.

Management revealed that its in-store rollout in Australia and New Zealand remains strong and is becoming entrenched in the bricks and mortar retail landscape.

During the 5 months to the end of May, in-store represented approximately 20% of total Afterpay ANZ underlying sales. This is up from around 15% in the first half.

Strong in-store growth has been exhibited in major Australian retailers that have onboarded during the course of FY 2019. This will be a continued growth focus as other large retailers such as Myer Holdings Ltd (ASX: MYR) integrate Afterpay's in-store service in FY 2020.

Interestingly, almost a quarter of Afterpay's new customer growth in Australia is coming through in-store acquisition.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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