Is the Afterpay Ltd (ASX: APT) share price a buying opportunity? The buy now, pay later business just reported another quarter of strong growth to the market.
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Afterpay's FY21 third quarter
Total underlying sales went up 104% to $5.2 billion. In constant currency terms, underlying sales went up 123%.
There was a mixed level of growth across its main operating regions. North American underlying sales soared 167% higher to $2.6 billion, it's now the biggest segment. ANZ underlying sales grew 48% to $2.1 billion. UK underlying sales jumped 246% to $0.5 billion.
The US became the first region to record more than $1 billion of underlying sales in a single month.
Active customer growth also saw different levels of increases. UK customers went up 134% to 1.8 million, which will help future growth. North American customers grew 112% to 9.3 million. ANZ active customers only went up 9% to 3.5 million. Total active customers grew 75% to 14.6 million.
There was strong growth with its number of active merchants. Total active merchants grew 77% to 85,800. North American active merchants rose 154% to 23,200, ANZ merchants increased 49% to 57,700 and UK active merchants went up 672% to 5,000.
The rollout of its in-store presence in the US continues, with a number of new retailers going live in the first half of FY21. ANZ in-store volumes continue to recover and are now tracking near to pre COVID-19 levels.
The buy now, pay later business said that merchant revenue margins remain in line with what was reported in the six months to December 2020.
Repeat customers are becoming even more important for the Afterpay share price
Afterpay said that the network effect of its platform continues to drive increasing customer frequency across all regions.
The top 10% of customers globally, on average, now transact 33 times per year per year. That breaks down to around 23 times per year in the US, 62 times per year in ANZ and 29 times per year in the UK.
Europe growth incoming
Afterpay revealed that merchants with over $1.5 billion of total addressable online sales are live, integrating or signed in the EU after the completion of the Pagantis acquisition and launch of Clearpay across Spain, France and Italy in March 2021.
Is the Afterpay share price an opportunity?
Brokers have mixed thoughts on Afterpay shares.
Credit Suisse thought that this quarter was better than it expected and had solid customer growth, but not quite as good as its forecast. The broker decided to slightly decrease its forecast of underlying sales for FY21. It has a price target of $145 on Afterpay.
However, UBS still has a negative outlook on the Afterpay share price with a price target of $36. The broker noted the strong northern hemisphere growth, though the UK customer growth was a bit lower than expected.
In-particular, the broker noted that ANZ saw single digit customer growth because it has reached a certain size, which is why it decided to reduce its FY21 expectations for sales. But that doesn't impact the medium-term outlook much.
