Afterpay Share Price Under Spotlight On FY21 Results (ASX:APT)

The Afterpay Ltd’s [ASX:APTshare price is on watch today after the buy now, pay later (BNPL) provider announced its full-year results for FY21.

There appeared to be mixed news in the report. Although Afterpay admitted a widening net loss of $159.4 million, this was despite growing sales 90% in FY21.

One of the most high-performing but volatile stocks in recent times, Afterpay’s share price has barely moved in response to morning news and is currently sitting at $133.84.

This is not exactly usual for the company, whose shares have done a lot of zig zagging in the past 12 months.

But the lack of price action likely reflects Afterpay’s status as Square’s all-scrip acquisition target, with investors pegging APT more to Square’s share price than to today’s results.

ASX APT - Afterpay Share Price ChartSource: Tradingview.com

Today, let’s look at the outlook for Afterpay shares in the coming months…

A rapidly scaling business, with fierce competition clipping at its heels

Afterpay has enjoyed a successful couple of years, delivering strong returns to early investors and emerging as one of the first leaders in the BNPL sector.

And FY21 results are showing that the company continues to grow at an exciting rate.

Consider the following highlights:

  • Underlying sales have jumped 90% to $21.1 billion.
  • Total group income has also increased by 78% to $924.7 million.
  • Exceeded objective to reach $20 billion in underlying sales 12 months early.
  • Active customers grown to 16 million, and approximately 100,000 active merchants partnered with.

These great results were arguably driven by a number of Afterpay’s strategy moves during the year, including growth across its ANZ, Clearpay, and North America operations.

Afterpay’s Chair, Elana Rubin AM, believes the company is firmly positioned to cater to tomorrow’s buyers.

She noted:

Global research continues to indicate that credit cards and credit-based products are in decline, while BNPL continues to expand as a preferred way to pay. Millennials and Gen Z are less likely than their parents to use a credit card, and more likely to engage with organisations and brands that they trust.

These factors underpin the important role that Afterpay now plays in social and economic empowerment.’

The bigger picture…

Afterpay is not the only player in the BNPL arena.

With other companies emerging and gaining popularity with e-commerce retailers and buyers during lockdowns, there’s no guarantee Afterpay will prevail long into the future.

Of course, it will be interesting to see what APT can achieve under Square’s wing.

There were numbers to note in Afterpay’s announcement, too, that weren’t as peachy as the highlights.

For one, the company’s marketing expenses have grown by 239% to $168.8 million, while bad debts have increased 106% to $194.9 million.

But in saying that, it’s not a bad thing to see a company investing so aggressively in itself.

The BNPL sector is continuing to ramp up over FY21, and it’s obvious that Afterpay is hungry in dominating this space. There’s little reason to not believe that fantastic scope for growth doesn’t lie ahead.

The share price has been wildly rising, and the company is currently in the process of being acquired by US payments giant Square in a $39 billion deal.

Bullish shareholders may well believe this will ultimately bring good tidings.

I’ve always had a soft spot for this stock because it was one of the stocks our team at Australian Small-Cap Investigator recommended long before it shot up into the success story it is today.

Well, our leading small-cap stock market analyst Murray Dawes believes he’s found seven other stocks with similar potential…

And while there’s no guarantee they’ll perform like Afterpay have, they’re certainly worth a look.

You can check them out here by downloading Murray’s free report here.

 

Regards,

 Kiryll Prakapenka,

 For Money Morning

PS: The Next Afterpay? Discover three promising Aussie fintechs that are currently trading below $1. Click here to learn more.


Kiryll Prakapenka is an investing autodidact who is passionate about conducting in-depth research on investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from The University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding of the fundamentals behind companies.


Money Morning Australia