Why the Humm (ASX:HUM) share price just hit a 52-week low

The Humm Group Ltd (ASX:HUM) share price is under pressure today despite the release of a solid third quarter update…

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The Humm Group Ltd (ASX: HUM) share price is under pressure on Thursday morning.

At the time of writing, the financial services company’s shares are down 2.5% to a 52-week low of 85.5 cents.

Why is the Humm share price tumbling?

Investors have been selling the company’s shares this morning after weakness in the tech sector offset a reasonably upbeat trading update.

According to the release, Humm’s buy now pay later (BNPL) business reported record transaction volume of $100.8 million during the month of March. This led to its third quarter volume reaching $264.8 million, which was up 33% on the prior corresponding period.

The Commercial and Leasing business is also performing well. It reported volume of $142.2 million, up 61.7% on the prior corresponding period.

However, things weren’t anywhere near as positive for its Cards ANZ segment. It reported volume of $264.8 million for the quarter, which was down 33% on the prior corresponding period. Positively, management advised that spending is returning to key volume categories now.

At the end of the period, Humm had a total of 2.7 million customers across its businesses. This is up 40% on the prior corresponding period.

It will be hoping to boost these numbers with its UK launch in the near future. Management advised that it is on track to launch in the lucrative market this financial year. The company is also looking at the Canadian market and is aiming to launch there in the first half of FY 2022.

Management commentary

Humm’s Chief Executive Officer, Rebecca James, was pleased with the quarter.

She said: “hummgroup has performed strongly with our bigger Buy Now Pay Later product – and the ability to finance larger ticket items over longer terms – continuing to be a key point of differentiation. The business delivered record transaction volume for our BNPL segment in March of $100.8m, eclipsing peak seasonal trade, normally reserved for December. The strong growth coincided with an improvement in net transaction margin driven by strong loss performance and low cost of funds.

“The Commercial and Leasing segment is growing rapidly, up 61.7% on pcp, driven by a superior service proposition which has the business gaining market share from the major banks. Credit performance has also improved materially from the previous period. The business is significantly more capital efficient following the successful completion of a $450m Australian asset-backed securities transaction. Mezzanine warehouse funding is planned to further improve return on equity, in line with the initial recommendation of the strategic review,” the Chief Executive Officer added.

She also advised that the company continues to expect its second half cash net profit to be lower than the first half.

Following today’s decline, the Humm share price is now down 23% since the start of the year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Humm Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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