Afterpay Limited (ASX:APT) recently shared its 3Q21 business update, unveiling key performance metrics and strategic moves that warrant a closer look.
Impressive Growth
Group sales surged to A$5.2bn, marking an impressive 100% increase on a year-on-year (pcp) basis. However, a sequential dip of 9% was noted from the seasonally robust 2Q21.
Robust Customer and Merchant Growth
Group customers and merchants witnessed substantial growth, soaring by approximately 75% on pcp. Sequentially, both customers and merchants demonstrated notable increases of 11%-15% compared to 2Q21.
Stable Margins and Loss Rates
Management emphasized the stability of group margins, remaining firm despite market fluctuations. Additionally, loss rates continued to stay below historical levels, contributing to Afterpay's resilience.
Strategic Moves and Initiatives
Exploring a US Listing
Recognizing the North America division as the largest contributor to the group, Afterpay is set to explore the possibility of a US listing. This move reflects the company's commitment to harnessing the vast potential of the North American market.
Financial Services Expansion
Afterpay's foray into financial services includes the exploration of APT Money, expected to launch in 1H22, with ongoing testing of deposit and savings accounts. This diversification aligns with Afterpay's growth strategy.
Global Expansion
Afterpay's global footprint expanded with launches in Spain, France, and Italy during 3Q21. Clearpay is on track to launch in Germany in 1H22, underscoring the company's commitment to worldwide market penetration.
Performance Evaluation
Amidst the dynamic landscape, revenue margins in 3Q21 remained robust, consistent with 1H21 levels. Customer transaction frequency surged globally, with the top 10% of customers transacting 33 times a year, showcasing a loyal and engaged customer base.
North America emerged as a powerhouse, reporting a remarkable 167% growth on pcp. This region's sales, coupled with strong merchant growth and in-store momentum, solidify North America's position as the leading contributor to group sales.
Forecast Adjustments
Despite the positive momentum, Afterpay adjusted its FY21F/FY22F EPS forecasts, lowering them by 7%-8% due to slightly revised sales growth assumptions.
Investment View
While Afterpay is acknowledged as a quality business, the current valuation prompted a Hold recommendation. Analysts remain vigilant on valuation grounds, recognizing the dynamic nature of the market.
Afterpay's 3Q21 update reflects a blend of remarkable growth, strategic exploration, and market resilience. The company's agility in adapting to market shifts and its ambitious global expansion plans position it as a notable player in the evolving landscape of the fintech industry.
