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Is Splitit the next Afterpay?

What a wild ride it has been for Splitit Ltd (ASX: SPT) shareholders.

After its Initial Price Offering (IPO) in January, SPT shares shot from 38 cents all the way up to $2 by March – a two-month bag of 430%. However, this proved to be something of a flash in the pan, and Splitit shares have been trending down ever since, hitting the 40 cent mark for the first time since January last week. This came as payments king Afterpay Touch Group Ltd’s (ASX: APT) share price hit a fresh new all-time high.

That all changed again when Splitit released its maiden earnings report as a public company on Friday. Investor’s clearly liked what they saw and pushed the Splitit share price up 38% to 55 cents in a single day.

So do these fresh, exciting numbers mean that this payments minnow is set to be the next Afterpay?

What is Splitit?

Splitit is the newest company to try and crack the Buy Now-Pay Later (BNPL) space. It offers payment instalments on purchases with no interest payable. If you’re thinking this sounds like Afterpay, here’s the difference. Splitit uses your existing credit or debit cards for payment, rather than extending a new line of credit as Afterpay does. As such, Splitit is very keen to tell us that using its products will not affect your credit score and you can even keep receiving credit card benefits such as Frequent Flyer points from Qantas Airways Ltd (ASX: QAN) when using the service. Splitit has partnered with many Australian retailers like Ltd (ASX: KGN), Simba and Fashionette and plans to continue to grow these rapidly.

Is Splitit the next Afterpay?

Well, it has the growth numbers to back this up (to a point). Its 2019 half-year earnings report which was published last week showed revenue growth of 193% to US $798,000 (over 1H18) and a gross profit of US $721,000 (which was up 468%) with total payments volume of US $34.4 million. However, this didn’t stop the company from posting a net loss of US $3.8 million (which was up from US $1.2 million in H118).

Compare this to Afterpay’s total income for the 2019 financial year of $264.1 million on a total payments volume of $5.2 billion.

Foolish Takeaway

On these numbers, you can see that Splitit has a long way to go before even entering Afterpay’s ballpark. Although its early days for the company and it is posting big growth numbers, it remains a minnow and I personally am going to wait and see if it can carve out a sufficient niche to really compete in the BNPL space before even considering an investment.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended ltd. 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.