Both have proven business models in their respective market niches. Both also continue to grow strongly internationally, and I believe are well placed for above average earnings growth over the next 5–10 years.
The Afterpay share price has witnessed an amazing recent run on the ASX. It has risen from $8.90 in late March in the early phase of the coronavirus pandemic, to now be trading at $68.00. That’s a gain of over 600%!
This buy now, pay later (BNPL) provider has continued to perform well financially, despite challenging market conditions. This was confirmed by a strong market update in late May. In particular, its US operations have been growing strongly. Nearly 9 million US consumers now use the Afterpay platform.
Tencent Holdings, which owns messaging app WeChat, recently became a major shareholder in Afterpay. This also has definitely pleased the market. The WeChat app is hugely popular in the Asian market and Afterpay could potentially leverage WeChat as a means to gain inroads further down the track.
Also, a recent partnership with Apple will enable the Afterpay platform to be integrated with Apple Pay. This is slated to make the Afterpay platform even easier to use, and could assist in driving further uptake, especially in the massive US market.
Despite the strong rise in the Afterpay share price, Afterpay is still in my buy zone. It is still very early days for Afterpay in the US market, and Europe and Asia are further expansion points in the future.
The Carsales share price was hit hard during the early stage of the coronavirus pandemic, however rallied strongly since late March. The online automotive classifieds provider has now regained nearly all of its share price losses since its 12-month high in mid-February. This ASX share has continued to perform solidly in recent months, despite difficult trading conditions.
In a recent trading update, Carsales revealed that total revenue is predicted to be flat for FY 2020. Earnings before interest, taxes, depreciation, and amortisation, however, is expected to rise slightly. I think that this is a commendable result, particularly when you consider the devastating impact that the pandemic had on the automotive sector in its early phase.
I believe that Carsales continues to be well placed to outperform the S&P/ASX 200 Index (ASX: XJO) over the longer term. It has a strong entrenched position in the Australian market, with a growing local population, and has strong potential to grow its overseas operations.
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Motley Fool contributor Phil Harpur owns shares of AFTERPAY T FPO and carsales.com Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended carsales.com Limited. 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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