On Thursday all eyes will be on the Afterpay Ltd (ASX: APT) share price when the payments company releases its highly anticipated half year results.
Ahead of the release, I thought I would take a look to see what the market was expecting from the market darling.
Strong customer growth
The market is expecting Afterpay to reveal strong customer growth during the first half.
For example, according to a note out of Morgan Stanley from last month, its analysts are expecting the company to report active customers of approximately 13.6 million. This represents a 37.4% increase from 9.9 million active customers at the end of FY 2020.
A maiden profit
After operating at a loss for a number of years, Afterpay is expected to report its maiden profit this month.
According to a note out Morgans, it has pencilled in a profit after tax of $5 million versus the market consensus estimate of $21 million.
Whereas analysts at Goldman Sachs are predicting a profit after tax of $17.4 million from revenue of $440.2 million. The latter will be a 99% increase on the prior corresponding period. This is expected to be driven by operating leverage.
Investors have been told to keep an eye on Afterpay’s repeat use metric, which leads the industry.
Goldman Sachs commented: “In our view, this remains the single most critical metric for APT: strongly rising trends are indicative of product market fit, low default rates and future merchant pipeline.”
Growth in this metric could be supportive of the Afterpay share price and vice versa if it softens.
The market will be looking for updates on its international expansion in Europe and Asia with this results release.
Last year the company acquired its way onto mainland Europe via the acquisition of Pagantis for $82 million. Pagantis provides a range of buy now pay later and traditional credit services across Spain, France, and Italy. It also has regulatory approval to operate in Portugal.
The company also made smaller acquisitions in South East Asia and could provide an update on its plans in this market.
Another thing that could give the Afterpay share price a boost is an update on new product launches.
Afterpay will shortly release transactions accounts via a partnership with Westpac Banking Corp (ASX: WBC). It has been tipped to expand on this with other offerings such as investment products and even home loans. Though, it may wait to see what the reaction to its transaction accounts is before taking things further.
In addition, at the weekend the company emailed out a change to its term and conditions. Included within the terms was the mention of an Afterpay Card. This is a contactless Mastercard stored in an Apple or Google Pay wallet. It will allow users to tap and pay with their mobile device to pay in four instalments with Afterpay.
The imminent launch of this product appears likely to be announced tomorrow.
Is the Afterpay share price in the buy zone?
While it may not be wise to invest right before a results release, one broker that believes the Afterpay share price is in the buy zone is Morgan Stanley.
Last week the broker put an overweight rating and $170.10 price target on its shares. This compares to the latest Afterpay share price of $151.67.