Afterpay share price: where next following interim results

We examine some of the key figures from Afterpay's half-year results, released to the market this morning.

To grow or not to grow

Afterpay (ASX: APT) seemed almost preordained to deliver a growthy set of interim results today. Yet the important question here appeared to be not if the company would deliver growth – but rather if this growth rate would justify the stock’s current price.

Today’s results seemed to at the very least meet investor expectations; with the stock rising ~3% in the first 30-minutes of trade. Prior to the H1 release, APT traded at 31.69x FY19 sales – a lofty multiple by historical averages, even in the world of tech.

Yet speaking of APT’s growth trajectory, the company already kind of warned the market that its growth was being hindered, with Mr Eisen – Afterpay’s CEO and MD – recently saying, that regulation ‘has impacted our growth, and we think that will be the case for other companies trying to make headway overseas.'

Mind you, this ‘impacted growth’ has still seen Afterpay report a record set of FY20 interim results this morning – headlined by impressive revenue figures and a continued influx of new users.

Specifically, the fast-growing buy now pay later (BNPL) company reported H1 underlying sales of $4.8 billion (+109%), against total income (revenue) of $220.3 million (+96%).

In step with those top-line figures, merchants and users have continued to flock to APT. Active users rose 134% during the half – hitting a staggering 7.3 million.

The company also continues to on-board merchants at a rapid click, now counting 43.2 thousand as part of the Afterpay ecosystem.

Some of Afterpay’s cornerstone Australian merchants include: Myer, Revolve, Sephora, Big W, Culture Kings, and Jetstar.

Though APT continues to boast impressive growth statistics, the company remains loss making, with Afterpay reporting a first-half loss after tax of $31.6 million.

Finally, at the very least, Afterpay saw its late fees as a percentage of total income decline, coming in at 15.3% during the half.

Afterpay share price: the outlook and the cost of growth

Speaking of the company’s interim results, Anthony Eisen, the company’s Chief Executive, said:

'The strong metrics announced today reflect our team's efforts to considerably accurate sales growth across our global business, while at the same time balancing business performance and developing our team, infrastructure and capabilities for the future.'

Mr Eisen finished by noting that:

'We are now focused on exceeding our mid-term underlying sales target of over $20bn by FY22 and we are aiming to reach 9.5 million active customers by the end of this financial year.'

This growth objective, warned Mr Eisen, would eat into group profitability in the short-term.

The past, present and future

In the last two years the company has delivered market beating returns that have topped the index a number of times over. And though market volatility has recently knocked APT from all-time highs, the stock still trades for around double the price it did a year ago.

Prior to the release of today’s interim results, the Afterpay (ASX: APT) share price stood at $35.97.

By 10:32 (ADET) it traded at $36.810 per share.

One however wonders if today’s interim results will be enough to maintain the momentum that Afterpay has miraculously achieved over the last two years.

Growth, after all, is a precarious game in the investing world.

Watch this space.


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