Afterpay and 1 other ASX share to buy and hold beyond 2025

Here, we look at 2 ASX shares with solid growth potential that I think would make strong additions to your ASX share portfolio: Afterpay Ltd (ASX: APT) and Carsales.Com Ltd (ASX: CAR).

Phil Harpur

Phil Harpur has been contributing to Motley Fool Australia as a Freelance Writer since late 2019. Phil has spent the last 25 years working as a Senior Technology Analyst for some of the leading global technology research firms. Over the years, his market insights have been quoted in publications such as the AFR, SMH and the Australian, and he has appeared on business TV programs including Bloomberg, CNBC, Fox Business and the ABC. Phil is passionate about the share market and investing. He has post-graduate qualifications in Applied Finance and Investment from the Securities Institute of Australia. In his spare time, Phil likes to chill out listening to his favourite jazz artist or hanging out at the beach.

Published July 8, 2020 9:26 am AEST

Here, we look at 2 ASX shares that I think would make strong additions to your ASX share portfolio: Afterpay Ltd (ASX: APT) and Carsales.Com Ltd (ASX: CAR).

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.

Macquarie shre price asx share price opportunity represented by road sign saying opportunity ahead — Image source: Getty Images

Afterpay

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.

Carsales

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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