Afterpay: buy now (online), pay later

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Afterpay allows people to buy products online now, but only pay later.

I can imagine why people use this service. For example, if David receives his salary on the 31st of this month, he can do online shopping before then and just repay once he received his salary. The cool factor is that you don’t pay interest on your debt if you pay on time.

Personally, I would probably never use this service as I am not a fan of having debt, even if it is short term debt. However, Afterpay currently has almost 10 million active users with operations in Australia, United Sates, New Zeeland, and the United Kingdom.

FY20 key metrics:

  • Underlying sales growing 112% to $11.1 Billion.
  • Active customers up 116%,
  • Will be non-profitable for next few years, as they focus on expansion and gaining market share.

Business model:

  • Repayment terms = up to 8 weeks
  • Customer fees 10$ for initial missed instalments +7$ if missed again.
  • Merchant fees = 4.6% +0.3$

They make revenue through charging merchant and customer fees, which means the higher the volume, the better for Afterpay.

Risks:

  1. Regulation
  2. Competition risk can put pressure on margins.

Share info:

Share price: $71
Market Cap = $19.74Billion AUD
Year-to-Date share performance = +131.7%

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My opinion:

The first question you can ask yourself is, “Will I ever use a service like Afterpay’s?” If yes, ask yourself if you think Afterpay is most likely to win? This is definitely a high growth stock with a lot of potential!

The price is quite priced for perfection, if Afterpay misses estimates it can trigger a sell-off. It is a company with long term potential, especially as they are now focusing heavily on scaling the business.

I would love to own some Afterpay shares, but just at a lower price to be honest. So, my plan is to buy a small portion now and add more shares, if there any dips in the future.

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Higgo van Biljon
Easy user, Founder & CEO FinMeUp

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Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Higgo van Biljon, Founder and Chief Executive Officer of FinMeUp as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.

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