The Afterpay Ltd (ASX: APT) share price has risen again to an all-time high of around $156.
What’s going on with Afterpay?
The company has been growing very successfully over the last few years. Initially investors feared the worst for Afterpay during the initial COVID-19 sell-off, when it dropped to a share price just under $9. But now it has soared to a record of almost $156, though it’s currently sitting at around $155.
Afterpay is seeing surging underlying sales growth of its merchant partners. In November 2020, Afterpay said that it hit a new milestone by delivering over $2.1 billion of monthly underlying sales, more than doubling the $1 billion of underlying sales in November 2019. This was an increase of 112%. Australia and New Zealand underlying sales went up 54% to $0.9 billion. US underlying sales went up by 186% to $1 billion. UK underlying sales grew by 315% to $0.2 billion.
Since then there have been a couple of other updates and other pieces of news.
A competitor in the US called Affirm recently listed and caused even more hype for the buy now, pay later industry. The IPO listing price was $49, it has more than doubled to the current price of $103.
At 30 September 2020, Affirm had over 6.2 million consumers and more than 6,500 merchants. In the year to 30 June 2020, it made $509.5 million of revenue with a net loss of $112.6 million. Affirm’s business fundamentals made investors think that Afterpay was worth even more than before the listing.
Regulation
There have also been some regulation updates in recent months according to reporting by the Australian Financial Review, the boss of the Reserve Bank of Australia, Philip Lowe, has suggested that buy now, pay later companies will be able to keep telling merchants not to pass on costs on to customers. In the medium term, at least.
One of the reasons for reaching this conclusion was that the instalment method brings benefits and there has only been a relatively small change in the overall volume transacted compared to other existing payment months.
In the UK, Afterpay’s business called Clearpay said that it supports the Woolard Review’s proposal to bring the buy now, pay later (BNPL) industry under FCA (Financial Conduct Authority) oversight with proportionate regulation.
Summary thoughts
Who knows what’s going to happen next with the Afterpay share price? Is $200 or $100 more likely next? I really don’t know. Was $100 a reasonable share price? Was $150 a reasonable share price? It’s not the type of bet I’d want to make at this high level.
There are other ASX growth shares I’d rather pay in the payments space like Pushpay Holdings Ltd (ASX: PPH).
Instead of Afterpay, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.
