Afterpay (ASX: APT) rallied 7% yesterday, on the back of supportive news from President Trump’s stimulus plan. The strategy plans to provide relief on employees by introducing a payroll tax cut and aid with hourly workers in the Coronavirus epidemic in the US. While there was a large sell-off with the fear of the coronavirus case, Afterpay managed to rebound despite the ASX dipping into the bear market briefly today.
Afterpay is an Australian company and a market leader in buy now, pay later platform in Australia. The company has seen tremendous growth in 1H FY20, where the company recorded an increase in sales to $4.9b (up 109%) and net transaction margin to $102m (up 118%). Additionally, the company has expanded its services to 43.2k new active merchants (up 86%). Their aggressive growth strategy has seen them increase their marketing expenses to 0.7% compared to 0.3% in 1H FY19. While the expenses have gone up, the results have shown to be worth the spending.
The acquisition of ClearPay in the UK has seen positive results for Afterpay. The platform launched in May 2019 and during the 6 months of operations, the UK operations acquired 600,000 customers. This strong growth highlights the demand for this service worldwide and the skilled management acquired in the UK. Moreover, the partnership with MasterCard and Visa has helped them reduce costs and allows for room for future development opportunities.
One concern that has impacted Buy now, pay later platform is the regulatory action that could be taken by the Reserve Bank. The intervention by the RBA could see merchants impose a surcharge, on buy now pay later platform. This will make Afterpay operate like a credit card since consumers will have to pay an additional surcharge cost by using Afterpay.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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