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