Afterpay Ltd (ASX: APT) share price has stormed higher over the last 12 months and is up 80%, although its current share price of $33.17 is almost $10 off its 52-week high. Does this make Afterpay shares a buy today?
How has Afterpay performed recently?
In its 1H FY20 results presentation last week, the company reported underlying sales increased by 109% to $4.8 billion from $2.3 billion. It also posted a record number of customers globally at 7.3 million, which is up 134% from 3.1 million a year earlier.
In the massive US market, underlying sales grew by a whopping 445% from $0.3 billion in H1 FY19 to $1.4 billion in H1 FY20. The BNPL provider's UK sales in H1 FY20 were $0.2 billion. Afterpay's geographic expansion, particularly in the US, looks like it will be a significant growth driver for the company now and into the future.
The growth in active merchants is impressive, with Australia and New Zealand up 63% and the US up 421%. Afterpay has well known global brands such as Samsung and Foot Locker as merchants, which supports the impact its making around the globe.
Commenting on the results, CEO and Managing Director Anthony Eisen said:
Our global expansion is accelerating with the US and UK growing at considerably faster rate than what we experienced in ANZ. The US now represents 30% of the Group's underlying sales and has the largest number of customers actively using the platform.
The buy now, pay later landscape
According to Roy Morgan research, 1.95 million Australians used a BNPL service in the year to September 2019, which is up from 1.38 million in the previous 12 months. This is quite impressive and demonstrates the opportunity Afterpay has in this market.
This also spells bad news for the big banks like Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) because credit card use – a cash cow for the big banks – is continuing to decline.
To demonstrate the impact the shift away from traditional credit cards is having in this space, Commonwealth Bank of Australia (ASX: CBA) has recently announced a partnership with Klarna, a BNPL operator. However, according to the research cited above from Roy Morgan, Afterpay is currently the major player in the Australian market, with 49.5% brand awareness compared to the second player in the market Zip, which has 29.3% brand awareness.
Foolish takeaway
The Afterpay share price of $33.17 (as at Friday's close) is a significant discount on its 52-week high of $41.14. I believe that Afterpay shares may be a good long-term play, as the market for BNPL service continues to explode. While losses are widening, I think this is due to Afterpay's global expansion plans, and its current share price represents a great entry point that may reward patient buy-and-hold investors.
