Consensus community valuation
$45.36
Average Intrinsic Value
40.2%
Overvalued by
Active Member Straws
#Capital Raise
Added 2 months ago

AfterPay is taking advantage of its, er, "robust" share price to raise up to $800m.

Shareholders can subscribe for an additional $20k of new shares at $61.75 each, a ~9% discount to the last traded price (but a 100% premium to where they were at the start of the year).

Frankly, i think it's a smart move and a cheap way to access extra capital that can (hopefully) accelerate growth.

At the same time, founders Anthony Eisen and Nicholas Molnar will be selling ~2m shares each, or around 10% of their holdings. Again, hard to fault them given the current price (but perhaps somewhat telling of their estimation of value).

Further details can be found here

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#Bear Case
Added 2 months ago

Last week I attended (remotely) a mini conference held by a VC firm associated with my employer where a number of the startups the VC firm has invested in presented. There was a whole segment dedicated to BNPL, with three companies presenting. Two of them were straigh up Afterpay competitors with focuses on particular industry niches, and the third offered a white label BNPL solution to companies that don't want their customer loyalty erroded by independent BNPL providers. All three had attractive, easy to use functionality for payers and quick integration with merchants.

 

My reason for sharing this experience is that APT is priced like it has no effective competitors and will become dominant in the North  American and European markets. I feel that is overly optimistic as there are clearly a host of well financed fast followers chasing them and trying to capture market share. Not to mention the possibility that large merchants will likely prefer to provide their own BNPL offering via a white label solution rather than fork over 4% to APT. This will reduce APT's growth and squeeze their margin, ultimately leading to lower profitablity and a lower shareprice.

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#Too expensive?
Last edited 2 months ago

A brain dump on AfterPay:

https://twitter.com/tickertvau/status/1282538917267337217

I think there's a lot to like about the business, but find the price very difficult to take. 

At the current price, it's a bet on whether bnpl legitimately becomes a lasting global phenomenon, and that AfterPay can hold a major share of it. 

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#Paypal enters BNPL market
Last edited 3 weeks ago

01-Sep-2020:  From Marcus Padley's ("MarcusToday") EOD (end-of-day) email:

BNPL stocks woke up to a brave new world, one where a big gorilla is flexing its muscles, as Paypal announced it was entering the market sending the sector into a tail-spin. SZL dropped 14.7%, OPY down 7.2% and Z1P down 12.8%. The behemoth APT dropped 8.0%, leaving the All Tech Index down 2.2%.

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#Tencent buys 5% of APT
Last edited 5 months ago

01-May-2020 (7:23pm):  Afterpay welcomes Tencent as a substantial holder

Media Release, 1 May 2020.

AFTERPAY WELCOMES TENCENT AS A SUBSTANTIAL SHAREHOLDER

Afterpay Limited (Afterpay) is pleased to welcome Tencent Holdings Limited (Tencent, 00700.HK) as a substantial shareholder of Afterpay, confirmed by the lodgement of a notice of initial substantial holder on the Australian Securities Exchange on 1 May 2020.  

Tencent is a listed company on the Hong Kong Stock Exchange. The company provides Internet valueadded services, including digital entertainment, online advertising, and FinTech and cloud services to users. Its communications platforms include Weixin, WeChat and QQ. Its Weixin Pay service is the leading mobile payments platform in China, facilitating an average of over 1 billion commercial transactions per day.

Anthony Eisen and Nick Molnar, Co-founders of Afterpay commented:

“We feel very privileged to welcome Tencent as a substantial shareholder in our business.  Being able to attract a strategic investor of this calibre is extremely rewarding and is a testament to our team and the strength of our differentiated business model.

“Tencent’s investment provides us with the opportunity to learn from one of the world’s most successful digital platform businesses.  To be able to tap into Tencent’s vast experience and network is valuable, as is the potential to collaborate in areas such as technology, geographic expansion and future payment options on the Afterpay platform.  

“We remain focused on delivering value for our new and existing shareholders over the long term.”

James Mitchell, Chief Strategy Officer of Tencent, commented:

“We are pleased to become investors in Afterpay. Inside China we operate the leading digital payment service and a rapidly growing FinTech platform, and outside China we have actively invested in pioneering FinTech companies, providing us with unique insights into emerging FinTech services. Afterpay’s approach stands out to us not just for its attractive business model characteristics, but also because its service aligns so well with consumer trends we see developing globally in terms of Afterpay’s customer centric, interest free approach as well as its integrated retail presence and ability to add significant value for its merchant base. We look forward to a deep and long-term business partnership between Tencent and Afterpay.”

--- ends ---

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#ASX Announcements
Added 4 weeks ago

Afterpay to expand into Europe

SUMMARY

  • Afterpay is expediting its expansion into new markets to capitalise on strong consumer and merchant demand and to increase its global footprint.
  • Afterpay has identified the European Union (EU) as the next logical step for international expansion due to its large millennial population, vast fashion and beauty retail markets, and significant debit card usage.
  • The addressable ecommerce market in the EU exceeds €300b1 ($494b).
  • Afterpay has entered into an Agreement to acquire Pagantis. Pagantis currently provides a range of buy now, pay later and traditional credit services across Spain, France and Italy with regulatory approval to also operate in Portugal. The addressable ecommerce market in these 4 countries exceeds €150b1 ($247b).
  • This acquisition accelerates and de-risks the roll-out of Afterpay’s Clearpay branded platform across the EU market with launch targeted for Q3 FY21.
  • The acquisition provides a fully staffed and experienced team, an existing technology stack and intellectual property as well as an immediate regulatory right to operate across all EU member states (subject to regulatory approval).
  • Pagantis’ current business which includes its existing technology and traditional credit style products (Pagantis Legacy Business) will be managed as follows on completion of the acquisition:
    * Existing technology will be re-configured to provide the Afterpay core product, and the business will be rebranded to Clearpay, enabling an expedited launch into Spain, France, Italy and Portugal with local language compatibility.
    * Pagantis’ existing consumer fee instalment and credit card offerings will be discontinued post completion of the acquisition.
    * Existing loan book will be retained by NBQ and is excluded from the transaction.
  • As part of the Agreement, NBQ will receive a minimum €50m in consideration (subject to customary adjustments), payable as follows:
    * Upfront Consideration - €5m in cash payable at completion; and
    * Deferred Consideration - €45m in cash, payable 3 years post completion. Deferred Consideration can exceed €45m, with any excess being payable in cash or Afterpay shares (at Afterpay’s election), provided the equity value of Pagantis exceeds €45m, 3 years post completion.
  • Completion of the acquisition is expected to occur in or before December 2020, subject to Bank of Spain regulatory approval to the proposed change of control.

View Attachment

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#Hiring During COVID
Last edited 3 months ago

It looks like they cut job ads through COVID, but have now started advertising for jobs again, at record levels.  Suggests that they're not really worried about COVID any more.

Source

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#FY20 Full Year Results
Added 3 weeks ago

27-Aug-2020:  FY20 Results Announcement   and   FY20 Results Presentation

plus  Appendix 4E and FY20 Annual Report

  • Total income* was up 97% to $519.2m From $264.1m (FY19)
  • Loss before tax improved by 37% to ($26.8m) Loss From ($42.8m)
  • Loss for the year improved by 48% to ($22.9m) From ($43.8m)
  • Loss attributable to the ordinary equity holders of Afterpay Limited improved by 54% to ($19.8m) From ($42.9m)

* Total income consists of Afterpay income, Pay Now revenue and Other income.

The Group achieved total income of $519.2 million for the year ended 30 June 2020, up 97% on the prior year. Growth in total income was driven by an increase in customer and merchant demand for the Afterpay service across all of the markets in which Afterpay operates including the ANZ, US and UK regions. Total income growth was supported by an increase in the value of customer orders processed through the Afterpay platform (referred to as Underlying Sales) and an increase in the average fee paid by merchants for the use of the Afterpay service (referred to as the merchant margin or Afterpay Income Margin).

The Group delivered earnings before interest, tax, depreciation and amortisation (EBITDA) (excluding significant items) of $44.4 million for the year ended 30 June 2020, up $18.7 million on the prior year. Higher EBITDA (excluding significant items) was driven by an increase in gross profit which more than offset planned increased investment in employment and operating expenses. Investment was directed to scaling Afterpay’s global operations and delivering on the Group’s publicly stated target of exceeding $20 billion of Underlying Sales by the end of FY22.

The Group recorded a statutory loss before and after tax of $26.8 million and $22.9 million, respectively, for the year ended 30 June 2020. Statutory loss before tax includes foreign currency gains, share-based payment expenses, net losses on financial liabilities at fair value, share of loss of associate and one-off items which totalled $20.0 million in the year, which are not included in EBITDA (excluding significant items).

--- click on the links above for more ---

[I do not hold APT shares.]

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#APT to join MSCI Fri 29-May-20
Last edited 4 months ago

Afterpay (APT) - Will join the MSCI Australian Index at the close of business Friday (29-May-2020).   Australia's second and third largest gold miners (after NCM), Evolution Mining (EVN) and Northern Star Resources (NST) also set to join the MSCI.

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#Broker / Analyst Views
Last edited 4 months ago

22-May-2020:  https://www.ausbiz.com.au/media/the-call-friday-22nd-may?videoId=1340

That's a link to "The Call" on Friday (22 May 2020) on the Ausbiz Business streaming service, which starts off with their "Stock of the Day", which was APT for this episode.  Jun Bei Liu from Tribeca and Adam Dawes from Shaw and Partners are wary of APT at current levels.  

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#Broker / Analyst Views
Added 3 weeks ago

27-August-2020:  https://www.commsec.com.au/market-news/reporting-season/aug-20/afterpay-ltd-apt-full-year-results-2020.html

That's Commsec's take on the APT FY20 full year result.

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#Broker / Analyst Views
Added 4 months ago

13-May-2020:  https://www.livewiremarkets.com/wires/10-most-tipped-big-caps-fundies-deep-dives

Excerpt:

Afterpay: What the market is missing

Shane Fitzgerald at Monash Investors Limited rounded off the series with his wire, Afterpay: What the market is missing.

Afterpay's share price has had the most remarkable year as Shane's chart testifies, and no doubt caused a few skipped heartbeats as its share price fell 75% in a single month, wiping around $7 billion off its market cap. Yet, in the 2 months that followed, the stock nearly quintupled recovering all of its ground and more. 

As it has been for each of the last few years, Afterpay is the outlier in the list of the most tipped stocks. With an incredible +42% performance year-to-date, whilst the market is still down close to 20%, this one stock is the main reason the average performance of the 'most tipped stocks' looks so good.

Click on the link above, or here, to get Shane's full view on the stock. While many are clearly bullish on this stock, a few things he said the market is still under-appreciating about it are that:

"Firstly, the market continues to under-appreciate the increase in existing customer usage of the service over time, and what this will do to underlying sales growth and the associated benefits to operating leverage. The market also under-appreciates the implications of APT’s targeting of small size transactions of on average $150. It has implications for regulatory risk as mentioned above, but it also has implications for competition as a number of buy-now-pay-later players have commenced operations but are tending to target higher market segments". 

Incidentally, if you want to be notified next time someone publishes commentary about Afterpay on Livewire, scroll to the bottom of this wire and click on the stock code/s of interest [click on the link above first though to get to the wire].

--- click on link for more ---

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#Broker / Analyst Views
Last edited 7 months ago

17-Feb-2020:  The link I'm about to give you is to a podcast of an interview / discussion between Michael Frazis (of Frazis Capital Partners) and Claude Walker (of EthicalEquities and "a rich life", also formerly the portfolio manager at Motley Fool Australia's "Hidden Gems" service) and they discuss APT from around the 14:30 mark through to around the 24:30 mark:  https://www.fraziscapitalpartners.com/podcast/episode/201bb0b7/episode-22-aussie-growth-stocks-for-the-next-decade-mike-and-claude-talk-polynovo-avita-audinate-pro-medicus-and-afterpay

Thanks to @Kaboom who has already posted this link (you can find it not too far below this in the newsfeed) in relation to Avita Medical (AVH) - who are discussed right after APT (from around the 24:30 mark).

Claude has never been onboard the APT runaway train (I'm in the same boat, or is that one-too-many mixed basic transport analogies?) but Michael Frazis certainly has been - since the beginning I believe.  Anyway, for those who are interested in Afterpay, it's probably worth listening to.

P.S.  Michael and Claude aren't brokers - and they don't work for broking firms, but they are certainly stock analysts, hence my choice of titles for this straw.

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#commentary
Added 2 months ago

Comforting point of view from Andrew Brown. But given 2020 so far, who knows.

--

Bonus: Andrew Brown on Afterpay (ASX: APT)' by Equity Mates Investing Podcast https://megaphone.link/ARN8492546613

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#ASX Announcements
Added 9 months ago

Regulatory Update – California, US

"The Company confirms that an Afterpay subsidiary applied for a California finance lender’s license through the DBO in 2019. The DBO issued the license on 12 November 2019 and the license is valid. Afterpay applied for the license to facilitate its potential future expansion into other service offerings in the US that align with the Company’s business model."

Woah now I believe they have a moat, pipping out Sezzle for the lender license. Afterpay can now take market share away from Sezzle in US. Massive news for the company. 

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#Is Visa a risk to APT?
Last edited 9 months ago
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