The Afterpay Touch Touch Group Ltd (ASX: APT) share price has nudged just over $32 again this afternoon for the second time this week.
It has been quite an incredible fortnight for the buy now, pay later operator. Since the start of last Monday the Afterpay share price has risen by around 33%. It was the impressive FY19 result that caused the surge in the share price.
If you didn’t see it, Afterpay’s global underlying sales rose by 140% to $5.2 billion with an annual run-rate in excess of $7.2 billion – suggesting growth of another 38% even if there’s no further growth for the rest of FY20.
Active customers rose by 130% to 4.6 million, with 5.2 million at the time of the report. It’s adding over 12,500 new customers a day. Active merchants grew by 101% to 32,300 with 35,300 when the FY19 result was published.
Afterpay’s growth seems very impressive when you consider how large the numbers already were that Afterpay was growing from in FY18.
The most exciting things for me from the report was that the US growth continues at a very fast pace. Even better was that 200,000 UK customers had been on-boarded in the first 15 weeks, higher than the US at the same time after launching.
But Afterpay isn’t growing at all costs. The BNPL company said that gross losses reduced to 1.1% in FY19 from 1.5% in FY18. That’s how it was able to generate, according to Afterpay, underlying free cashflow of $33.3 million and pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items of $33.3 million.
Afterpay’s growth is impressive. It’s now trading at 115x FY21’s estimated earnings. I’m still unsure of how profitable Afterpay can be once it has reached maturity in the US and the UK. Will its market share be chipped away if there are other large competitors like Zip Co Ltd (ASX: Z1P) offering similar or better terms to shoppers and/or merchants? Only time will tell.
But it’s not a bet I’d want to make, particularly at this valuation. I’d rather buy these top shares for my portfolio right now.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD 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.