Splitit Shares Down on Kogan Deal News: Is Splitit a Buy?
At time of writing, the share price of Splitit Ltd [ASX:SPT] is down 2.38%, trading at 62 cents.
The Splitit share price climbed sharply after its IPO in January and hit as high as $2.00 on 11 March, then began a steady slide down, as you can see in the chart below:
The latest news out of the company is that it has signed an agreement with Kogan.com, making it the first major retailer to adopt Splitit. We’ll look at Splitit’s outlook and its prospects for future share price growth.
Splitit share price falls after Kogan.com deal annoucement
Splitit shares rose quickly to 67.5 cents, then settled in the 61–62-cent range after the commencement of trading this morning, as investors digested the morning announcement.
The reaction was surprisingly muted given the scope of the announcement.
The company has recently raised $30 million to fund its growth through a placement in May — so they have a sizeable war chest to operate with.
This was combined with a Share Purchase Plan which closed in June and raised a modest $302,000.
Today’s announcement with Kogan could be seen as a breakthrough for Splitit after announcing a partnership with EFTPay early last month — a Hong Kong payment solutions provider focusing on digital wallet services.
With a major Australian retailer now on board, Splitit investors will be eager to see similar agreements inked with other big name retailers.
What’s the outlook for Splitit?
At the beginning of June, Splitit announced that they had hired Brad Paterson as Managing Director for North America.
Paterson brings significant experience from his previous roles with Inuit, PayPal and Visa.
Splitit is hoping that he can expand the company’s reach into North America, an area they describe as ‘critical’.
If Splitit can crack the lucrative US market, it would be a major step forward for the company.
Splitit would likely argue that what they do is tangibly different from Afterpay, but I believe the point remains that the two are competitors.
As per their quarterly activities report, they are experiencing strong growth of its Merchant Fees:
The key for Splitit will be getting more major retailers on board.
Kogan has 1.5 million active customers, according to the announcement, so it’s a good start. But a bit of patience may be required from investors.
You could, for instance, wait for a crossover of moving averages before making a move.
With the threat of competition lurking in the background and the company for now not profitable (it recorded a net operating cash outflow of $3.58 million in the quarter ended 31 March 2019), other small-cap stocks could be more attractive.
For Money Morning