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The Afterpay share price nears $100: buy, sell or hold 

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The relentless Afterpay Ltd (ASX: APT) share price hit an all-time record high of $95.97 on Thursday. As investors digest its FY20 results and the overall state of the buy now, pay later (BNPL) sector, could it be an opportunity to buy the Afterpay share price? 

Afterpay FY20 results 

The acceleration of Afterpay’s business in new markets and continued dominance in existing ones has seen its underlying sales soar 112% to $11.1bn. Meanwhile, active customers have increased 116% to 9.9m and active merchants are up 72% to 55.4k.

From a regional perspective, Afterpay’s underlying sales in Australia and New Zealand increased 52% with in-store sales up 81% despite COVID-19 related impacts. What we are now seeing is a transition from ANZ being a growth driver to a more mature market. The US business’ sales leaped 330% with pipeline of new and integrating merchants more substantial than at any previous period.

Finally, the UK business is building momentum, generating $0.6bn in underlying sales or 5% of total group sales in its first full financial year of operations. The Clearpay brand has achieved and exceeded 1m active customers with major retail deals such as Gymshark. 

The dark side of Afterpay’s FY20 performance was its 73% increase in EBITDA to $44.4m. Upon closer inspection, $19.9m of its EBITDA increase was a result of ‘foreign currency gains’. Excluding foreign currency gains, the group’s EBITDA actually fell 4.9% on pcp. 

What are the next steps?

Afterpay has a number of plans for global domination. The business extended its North American reach to include Canada as of August 2020. It also intends to accelerate its expansion into Europe with the acquisition European BNPL ‘Pagantis’ which will provide it the opportunity to launch in Spain, France and Italy with regulatory approval to also operate in Portugal. The addressable e-commerce market in these four countries exceeds A$247bn.

Furthermore, an in-region team will be established via a small acquisition of a Singapore-based company operating in Indonesia called ‘EmpatKali’. Here, Afterpay intends to explore opportunities to leverage Tencent’s network and relationships to expand into new regions in Asia. 

Foolish Takeaway

The Afterpay share price has been propelled by back-to-back announcements from its positive business updates, Tencent’s substantial shareholding, customer milestones and its expansion into Europe. This has kept the company materially improving while bolstering sentiment. I believe if the company has run out of news and developments in the near-term, it is likely that the share price takes a breather at its current levels. 

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Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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