A strong side effect of the social restrictions imposed to fight the spread of the coronavirus has been the rise of e-commerce. With many confined to their homes, completing everyday shopping online has become the ‘norm’. This has seen the likes of ASX growth companies, Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and digital retailer, Kogan.com Ltd (ASX: KGN) benefit from the surge in online shopping.
And even as restrictions ease, it could be a long time before brick and mortar foot traffic reaches pre-coronavirus levels. In fact, the crisis could have brought about a permanent change in the way people shop.
Let’s look into how this digital retailer and the buy now, pay later companies are benefitting from the shift.
The coronavirus crisis has turned promising e-commerce player Kogan.com into a bona fide market darling. Its share price raced to an all-time high of $13 last week, on the back of a string of positive business updates throughout the crisis.
With many traditional brick and mortar retailers closed and people confined to their homes during lockdowns, rates of online shopping increased dramatically. With one month still to go in the FY20 fourth quarter, Kogan has already recorded gross sales growth of 100%, and gross profit growth of 130%.
The company is hoping to use this unique opportunity to pursue further growth. Kogan shares were placed into a trading halt on Wednesday, 10 June after the company announced a $100 million capital raising. Kogan hopes to use the cash injection to take advantage of any ‘value accretive opportunities’. This could mean company acquisitions are on the horizon.
Since falling to a 52-week low of just $8.01 at the height of the market selloff in late March, shares in Afterpay have soared an astonishing 580% to a new all-time high of $54.69.
Investors initially flocked to Afterpay after the company announced it had continued to perform strongly throughout the March quarter. Underlying sales were $2.6 billion for the quarter, a 97% increase over the FY19 third quarter. Unsurprisingly, March notched up the company’s third-highest monthly underlying sales total on record.
Afterpay has since reached another milestone: 5 million active users in the US. This is a significant achievement as it gives Afterpay a foothold in a lucrative new market. This comes just two years after launching in the region. It is even more interesting now in light of the Quadpay acquisition by Afterpay’s key competitor, Zip. It will be fascinating to watch as the two major Australian players battle it out in the US market.
The share price of ASX buy now, pay later company, Zip skyrocketed recently after it announced plans to acquire New York-based fintech Quadpay Inc. Quadpay is one of the leading buy now, pay later platforms in the US. It has total transaction volumes for the most recent quarter of $225.1 million and revenues of $17.8 million.
Zip claims that once the acquisition is complete, it will be one of the leading global players in the buy now, pay later space with close to $250 million in annualised revenues. The company’s share price soared to an all-time high price of $6.79 on the back of the news.
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Rhys Brock owns shares of AFTERPAY T FPO, Kogan.com ltd, and ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Kogan.com 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.
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