Afterpay Ltd (ASX: APT) is fast becoming the success story of 2020. The Afterpay share price has risen a staggering 1,000% since its March lows and is rocketing higher again this week.
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Why the hype around the Afterpay share price?
The hype surrounding the Afterpay share price isn't new. The company is arguably the most well known buy now, pay later (BNPL) brand in Australia, even though it's only been operating for around three years. During that time, more and more retailers have been displaying the Afterpay logo on their doors and windows, so it's a brand that is hard to ignore.
Earlier this year, Chinese fintech giant Tencent Holdings, acquired approximately 5% ownership, driving the Aftrepay share price higher. Tencent is a well known player in the tech world, so having it onboard as a major shareholder certainly made Afterpay investors happy.
Recently, Afterpay announced its intentions to expand into Europe through the $82 million acquisition of Pagantis, a Spanish fintech company in the BNPL space. Although based in Spain, Pagantis currently operates in Spain, France and Italy, providing multi-region access for Afterpay.
Justifying the acquisition, is Afterpay's intention to use this brand to access the massive $500 billion eCommerce market in the European Union.
The Pagantis brand will ultimately be rebranded as Clearpay, with the existing technology being merged into the core tech provided by Afterpay. As a rough guide, Afterpay has earmarked the expansion plans to commence early next year.
As the BNPL giant already has operations in Australia, New Zealand, the United States and the United Kingdom, Europe is a logical next step.
Afterpay share price performance
The Afterpay share price is currently trading at $92.48, at the time of writing. This is almost crazy, considering the BNPL giant's stock was selling for less than $10 in March this year!
The last six months of trading represents a return to investors in excess of 1,000% – a staggering run.
When Tencent Holdings announced its 5% stake in the company, the Afterpay share price jumped more than 20% in a single day. This latest announcement around a European Union venture has had a similar effect, sending the stock in excess of 10% higher in Tuesday's trade.
Afterpay has returned an astronomical 3,300% to investors since its initial public offering (IPO), and doesn't look to be slowing down any time soon.
Upcoming results
Afterpay issued an announcement to the ASX on 18 August stating it would be releasing its FY20 results on Thursday 27 August at 10am, Melbourne time. While the expansion plans are very exciting for the BNPL player, investor concerns will no doubt be circling the fact that Afterpay is still unprofitable, losing more than $40 million per year. With revenue increasing, however, a break even could be achieved in a few short years.
Main competition
Afterpay is by no means the only player in this space, but it is one of the biggest and has a massive market share. Some of Afterpay's biggest competitors include Sezzle Inc (ASX: SZL), Splitit Ltd (ASX: SPT) and Zip Co Ltd (ASX: Z1P).
Foolish takeaway
The Afterpay share price has sustained a massive run for a company that isn't making any profit. I believe this is largely due to investors piling into the stock and wanting to share in the success. However, just because there's no profit yet, this doesn't mean it won't be there in the near future. Companies in this space need time to generate a profit and, at the end of the day, Afterpay is only three years old, so it's still very early days. The results release on Thursday this week should be very interesting given all the company's recent developments.
