The Afterpay Ltd (ASX: APT) share price hit a new all-time high on Wednesday, with shares trading for $102.97.
The stock has retreated to $99.19 per share at time of writing, alongside the wider selling in the S&P/ASX 200 Index (ASX: XJO). But year-to-date Afterpay’s share price remains up a stellar 222%. By comparison the ASX 200 is down 11% so far in 2020.
Afterpay’s record highs earlier in the week came after the company released its first quarter update for the 2021 financial year.
Afterpay reported strong results across all the regions it operates.
Underlying sales reached $4.1 billion, a 115% increase from the first quarter of the 2020 financial year. The company also noted that 45% of its like for like sales growth came from Millennials. In a sign that the BNPL space isn’t highly frequented by older generations, Gen X drove 25% of sales growth while Gen Z was responsible for 24%.
What does Afterpay do?
Afterpay is a leader in the buy now, pay later (BNPL) market. The company’s payment platform allows people to buy and receive goods and spread the cost of their purchase out over equal payments, without any interest fees.
The company was founded in 2015. Afterpay shares first began trading on the ASX in June 2017. The company now operates in Australia, the United States and the United Kingdom, with current expansion plans into the wider European market.
Why Afterpay’s soaring share price depends on US investors
Afterpay’s first quarterly report revealed its active global customers increased by 98% year-on-year. That’s seen its active customers reach 11.2 million. Notably, 6.5 million, or more than half, are in the United States.
Speaking to a virtual audience at the Australian Financial Review CFO Live event yesterday, Afterpay’s CFO Rebecca Lowde noted that the US isn’t just providing a huge lift in active users, it’s also providing a lot of investors:
A large part of our investor base is (in the) US and a large part of our expansion is into the US and UK, which are probably more the investors who do value growth rather than your EBTIDA multiple… The company has also been very open and transparent about what it is that it’s trying to achieve and has delivered to that well.
With its active user base in the US, and elsewhere, growing 98% over the past 12 months and underlying sales increasing 115%, the Afterpay share price may confound some analysts who believe it’s overpriced.
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Motley Fool contributor Bernd Struben owns shares in AFTERPAY T FPO. 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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