Afterpay vs Uber: the global growth race in focus
As Afterpay notches up yet another impressive growth milestone, we examine the company’s similarities with ride-sharing giant Uber.
Uber’s growth at all costs mentality, once led by a tenacious and often controversial Chief Executive, has seen the company transformed it into one of the most recognisable brands in the world.
That ascent has also seen the ride-sharing giant transformed into a fascinating case-study of venture capital psychology. At over 25 funding rounds, Uber has raised a staggering US$26 billion, though still managed to lose US$2.9 billion in Q1.
And high profile investors in Uber, such as Masayoshi Son’s Vision Fund, reported losses of around US$5.2 billion on its Uber investment, for the 12 months ending March 2020.
Others have questioned whether Uber Technologies will ever turn a profit.
Just ‘Afterpay’ it
Afterpay – like Uber – has also pursued a blistering growth agenda: breaking into new markets, racking up losses, raising fresh funds and most importantly: amassing a devout fan-base of mostly millennial users.
Just as you ‘Uber’ around, you ‘Afterpay’ your purchases, even during a global pandemic, apparently.
And speaking to the prolific scale of that growth project, Afterpay today announced that it had cracked 5 million active customers in the US, taking the company’s US user-base to over 9 million.
More impressively still, 1 million of those customers joined the platform in the last 10 weeks, as the Covid-19 pandemic pushes more and more people online.
'In April […] Afterpay had more than 15 million app and site visits, and Afterpay's U.S. Shop Directory contributed nearly 10 million lead referrals to its retail partners,’ the company said.
The company capped-off this latest announcement by reiterating its goal of being 'the world's most loved way to pay.' And even that slogan – all-encompassing in scope – echoes Uber’s original aim of becoming ‘everyone’s private driver.’
Afterpay has well and truly side-lined the pretence of merely being an Australian tech player: like Uber, and the tech giants that came before it – the ambition here is world-spanning.
Afterpay share price: profitability looms according to Morgan Stanley
Mind you, ambition comes at a cost. Just like Uber, Afterpay has struggled with profitability in the past. In FY18 APT lost $9 million, in FY19 it lost another $44 million; and in FY20e Morgan Stanley is currently estimating that Afterpay’s earnings (NPAT) will come in at negative $32 million.
Yet there is a path to profitability here, according to Morgan Stanley analysts, who forecast that APT’s earnings will turn positive in FY22e, expected to come in at $107 million. On such a figure, Afterpay would still trade at 114x earnings, though a more ‘modest’ 10.8x sales, according to the investment bank’s analysts.
Investors though seem little concerned by such ‘valuations.’ As with its users, investors have fallen in love with the high growth stock over the years.
Illustratively, though smashed amongst the March market carnage, from its 23 March close of $8.90 per share, to yesterday’s closing price of $42.89 per share – Afterpay has risen a staggering 381% in just a couple of months.
How to trade BNPL stocks
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To buy (long) or sell (short) Afterpay with CFDs, follow these simple steps:
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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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