Why the Afterpay (APT) share price has shrugged off a big loss

Posted: 25 August 2021 1:11 pm
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Shares in BNPL market leader Afterpay are up 71% over the past 12 months.

Shares in Australian buy now pay later (BNPL) giant Afterpay (ASX: APT) are again among the most traded stocks on the ASX. Despite reporting a big loss, shares in the company are down just 0.6% to $134.26, at the time of writing.

Why is the Afterpay stock price holding firm?

Afterpay on Wednesday reported full year results, with its annual loss blowing out to $159.4 million compared with $22.9 million the previous year.

But the bigger loss was largely on account of its marketing costs more than doubling as the BNPL leader expanded into new markets to tap a pandemic-driven boom in demand.

Afterpay spent heavily to boost its presence in the largely untapped US region – the world’s biggest retail market. That helped deliver gains, with the value of the company's transactions nearly doubling to $21.1 billion in the 12 months to 30 June. The US has now overtaken Afterpay's home country of Australia to become its biggest market.

The company's gross loss margin was unchanged at 0.9%, while net transaction margins were slightly lower at 2.1%, from 2.3% a year earlier.

Surging sales

Afterpay lifted underlying sales by a whopping 90% to $22.4 billion, racing past its target of hitting $20 billion in underlying sales 12 months ahead of schedule. Revenue for the year was also up 78%, mainly on the back of gains in the US market.

The sales growth was underpinned by growing repeat use and an expansion of customer numbers – with active customers up 63% to 16.2 million.

The BNPL leader is now working on expanding into new markets. It has earmarked Germany as a "priority region" after launching in Spain, France and Italy as well as Canada in FY21. It will also expand its in-store cards offering into the UK market in the second quarter of FY22.

The company has also outlined the launch next month of Afterpay IQ – an insights platform that will provide merchants with deep consumer data points to help optimise their marketing investment.

The rapidly expanding global business is what underpinned the US$29 billion (AUD$39 billion) takeover deal from US financial services and digital payments company Square (NYSE: SQ), announced earlier this month. Afterpay confirmed the transaction is likely to be completed in the first quarter of calendar year 2022.

Considering investing in Afterpay shares?

If you are keen to buy shares in Afterpay you should consider investing through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some trading platforms offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available for Australian investors.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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