The Afterpay Ltd (ASX: APT) share price is up more than 2% in morning trading today. Is the buy now, pay later company an opportunity after the sell-off?
It has been many months since Afterpay was this low. But it's processing even more underlying sales than it was last year.
Less than a month ago investors got a very good look at Afterpay's FY21 third quarter numbers which showed continued growth despite COVID-19 impacts.
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Afterpay's FY21 third quarter
Global underlying sales doubled from $2.6 billion to $5.2 billion. Growth in Australia and New Zealand has slowed, with 48% growth to $2.1 billion. North American underlying sales rose 167% to $2.6 billion. UK underlying sales jumped 246% to $0.5 billion.
March 2021 exceeded December 2020 and delivered the second highest monthly underlying sales ever recorded, with the US becoming the first region to record more than $1 billion of underlying sales in a single month.
Overall customer growth was strong, but there was a varied performance between regions. North American customers grew 112% to 9.3 million and UK customers went up 34% to 1.8 million, however ANZ customers only rose 9% to 3.5 million. Total customers grew 75% to 14.6 million.
Total active merchants grew 77% to 85,800. ANZ merchants grew 49% to 57,700, UK merchants went up 672% to 5,000 and North American merchants rose 154% to 23,200.
There were a number of other positives. Repeat usage is rising – the top 10% of global customers, on average, now transact 33 times per year. ANZ in-store volumes continue to recover and are tracking near to pre-COVID-19 levels at approximately a quarter of ANZ's underlying sales.
The EU is the next frontier for Afterpay's potential growth. Merchants with over $1.5 billion of total addressable online sales are live, integrating or signed in the EU following the completion of the Pagantis acquisition and launch of Clearpay across Spain, France and Italy in March 2021.
Gross losses continue to remain below historical rates in all regions. Net transaction losses as a percentage of underlying sales also remained low.
Is the Afterpay share price an opportunity?
Plenty of brokers seem to think so.
Morgan Stanley rates the Afterpay share price as a buy, with a price target of $149. That suggests an upside of around 75% over the next 12 months.
Afterpay's app downloads during April 2021 was much stronger than the prior corresponding period and stronger than the starting months of 2021. The broker is confident about the US growth potential.
Credit Suisse also rates Afterpay as a buy, with a price target of $145.
But not every broker rates the buy now, pay later business as a buy. UBS rates Afterpay as a sell with a price target of $36. That's still a long way from where the Afterpay share price is today.
