Motley Fool Australia

One bullish growth signal for the Afterpay (ASX:APT) share price in 2021

asx buy now pay later shares such as zip and afterpay share price represented by finger pressing pay button on mobile phone
Image source: Getty Images

Diehard BNPL investors have something new to cheer about as they have a new reason to believe in the Afterpay Ltd (ASX: APT) share price.

After returning a 15-fold return since the depth of the COVID-19 market crash last year, there were bound to be questions about Afterpay’s valuation.

But if hiring intentions are any guide, there are reasons to be optimistic about the APT share price and that of its peers.

Job ads signal for Afterpay share price

Citigroup tracked job ads in the December half and found a big increase among several ASX tech stocks.

Hiring intentions are typically a good indicator for growth. Companies will only take on staff to cope with stronger demand for their goods and services, or anticipate material growth on the horizon.

The broker also pointed out that job ads reflect management confidence in their outlook, and in some cases strengthening balance sheets from capital raisings.

Gearing up for a big 2021

Two ASX tech stocks that tapped investors for capital recently include Zip Co Ltd (ASX: Z1P) and Nearmap Ltd (ASX: NEA).

While Afterpay was actively ramping up hiring, it wasn’t the most aggressive, according to Citi.

“As a % of existing headcount, Zip had the highest listings followed by Afterpay with job listings in the December half representing 59% and 55% of total headcount, respectively,” said the broker.

“We see this as a function of ongoing investment driven by strong growth as well as geographical and product expansion and note that both companies have the highest revenue growth outlook within our coverage.”

ASX tech stocks with biggest growth ambitions

It’s also worth noting that Zip’s hiring activity was focused on the US where its ramping up Quadpay.

Meanwhile, Nearmap’s job listings jumped to 35 in the second quarter of FY21 compared to 14 in the first quarter.

But if you were wondering who topped the job ad leader board, it’s not either of these buy now pay later (BNPL) ASX darlings. The crown goes to the Xero Limited (ASX: XRO) share price.

“Xero had the highest number of listings in the December half, with hiring activity improving after slowing in the June quarter,” explained Citi.

“While we see this as a positive signal and points to improving trading conditions, the fact that Xero had the highest listings is not surprising when considering that Xero has the largest headcount within our coverage.”

ASX tech stocks on hiring freeze?

On the flipside, the level of job activity doesn’t bode well for the Altium Limited (ASX: ALU) share price and WiseTech Global Ltd (ASX: WTC) share price.

The broker noted both of these tech stocks had the lowest listings as a percentage of existing headcount in 1HCY20.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Brendon Lau owns shares of Nearmap Ltd. Connect with him on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and WiseTech Global. The Motley Fool Australia has recommended Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Related Articles…