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Why the Splitit share price ended the week up 37%

The Splitit Ltd (ASX: SPT) share price went crazy today, it rose by over 36%. It wasn’t any normal day for the buy now, pay later operator – it reported its half year result on Friday.

As you might be able to guess, there was impressive growth of active merchants and unique shoppers revealed in the reprot, up 121% and 228% respectively compared to the prior corresponding half year.

Total payment volume rose by 134% to US$34.4 million, leading to revenue from continuing operations growing by 193% to US$798,000 thanks to rising merchant fees. This helped gross profit soar 468% higher to US$721,000.

New commercial partnerships signed during the year will help rapidly scale merchant numbers, according to management. EFTPay signed in the first half, GHL and Ally Commerce have signed in the second half.

The buy now, pay later company said that it expects to continue to deliver strong growth in unique customers and transaction volumes to grow merchant fees in the second half of the year and beyond. Importantly, management said the company has the balance sheet to support its growth and invest in its platform & marketing. Splitit had a cash balance of US$23.7 million at 30 June 2019 after the IPO and a subsequent capital raising.

The growth reported by Splitit was very impressive in percentage terms, but it was starting from a small base. It will be interesting to see whether the business can deliver triple-digit growth for many reporting seasons in a row like Afterpay Touch Group Ltd (ASX: APT) has.  

Foolish takeaway

With so many buy now, pay later operators I do wonder whether it’s possible that all of them can survive and thrive (or not).

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Motley Fool contributor Tristan Harrison 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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