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#Fundie / Analyst Views
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Added 3 years ago

Monash Investors' Simon Shields' view on AfterPay as discussed in Buy Hold & Sell segment on Livewire today:

https://www.livewiremarkets.com/wires/buy-hold-sell-3-outstanding-results-and-2-shockers

Matthew Kidman: And here we go with our new segment, and this is where you earn your money, guys, Questions Without Notice. Michelle, you're going to go first. You got something for Simon, so it knocks him off his feet and he doesn't know what to say.

Michelle Lopez: Well, I'm going to carry on with the whole tech and growth thematic that we've just been talking about. And I know, Simon, you're quite a bull, I guess, on Afterpay. And just wanting to ask you one question. What's the one insight that the bears are missing on Afterpay, and where do you see value in Afterpay?

Simon Shields: Okay. The big insight that the bears are missing on Afterpay (ASX:APT) when they do their forecasts, is around the frequency of use by customers, the longer the customer has been a customer. So in the first year, the customer would use it four or five times. And that grows to 12 times in the third year. And now, when you go four-plus years out... and, of course, that's lengthening as well... you're up to 29 times. Now that sounds like a lot. But when you bring that back to how many times a month that is, that's less than three times a month. And we're not talking about big amounts of money for each transaction. So that's what they've missed. 

Now, I have been a big bull on Afterpay. I think the business is a magnificent business. But in fact, we sold out completely of our Afterpay at $150 a share. Right? And that's because we've got a view about what Afterpay is going to do over the next five, seven, eight years. And because of that frequency of use insight, it's actually easier to forecast the forward revenues on Afterpay than what it is for a normal company that's having to go out every year and re-establish new customers and so forth. 

So, essentially, at $150 we felt that we were getting paid for the next seven or eight years of execution by Afterpay. So why wait around and see if they do a good job doing it? We took our money, and we left. And so, if it comes back enough, then it's upside might meet our hurdles again. And we may go back in.

My view: Simon was an early bull on AfterPay. The fact that he sold out completely at $150 is a good indication that AfterPay could struggle to go much higher from there in the short term, considering the macro environment we are in. 

Disc: I hold on my personal portfolio