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Afterpay rises on Qantas partnership, UBS ups PT to $25

As Afterpay announces a partnership with Qantas, UBS remains sceptical on the buy now pay later company’s prospects.

APT, QAN Source: Bloomberg

Afterpay and Qantas partnership in focus

The Afterpay (APT) share price rose during the morning session after the Buy Now Pay Later (BNPL) darling announced it had partnered up with Qantas Airlines.

Centrally, as part of the Qantas-Afterpay partnership, by linking their accounts, Afterpay and Qantas Frequent Flyer users will be eligible to accrue up to 5,000 Qantas frequent flyer points for purchases made on the BNPL platform.

The partnership is set to officially launch this week.

Speaking of today's announcement – Qantas Group’s Loyalty CEO – Olivia Wirth said 'Financial services is one of the most popular ways to earn points in the program, it's the quickest and easiest way to build your points balance.'

'With our 13 million members all having different spending habits and financial preferences, it's great to be able to offer more options and more rewards.'

Afterpay’s Anthony Eisen, by comparison argued that the partnership 'would provide significant upside for Afterpay customers.'

'We are always looking for ways to add value for our customers and this partnership between two iconic Australian brands is a great way to reward them for shopping with Afterpay.'

The Afterpay share price traded bullishly in early morning trade following the Qantas partnership announcement, rising 1.53% or $1.030, to $68.540 per share as of 11:08 AEST. At those price levels, the company has an implied market capitalisation of ~$18.0 billion.

Ultimately, the BNPL darling has seen its fortunes reverse significantly in recent months, defying the sceptics to trade ~700% higher, off the lows it recorded in March.

Qantas (QAN) – by comparison – traded down in the opening hours of trade, as aviation stocks continue to struggle. Overall, the airline’s stock is down around 45% year-to-date – with the coronavirus pandemic causing the global aviation industry to grind to a halt.

UBS ups price target, retains Sell rating

Elsewhere, the seemingly perma-bear UBS has held firm to its Sell thesis on Afterpay, though today upped their price target to $25.00 per share.

Though UBS notes that Afterpay has benefitted from the accelerated adoption of e-commerce as a result of Covid-19, the investment bank’s analysts nonetheless said: ‘we think the market is failing to appreciate the capital intensity required to fund APT's growth’, while conceding ‘in the absence of a catalyst, we acknowledge the market may continue to view valuation through a different lens.’

By contrast, UBS's bull case, upside target sits at $90.00 per share; while its downside, bear case target sits at $9.00 per share.

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