Can the Afterpay Touch Group Ltd (ASX: APT) share price return to $20 in 2019? That’s something all Afterpay shareholders will be hoping for.
What is Afterpay Touch?
Afterpay Touch is the owner of the popular “buy now, pay later” app. As of 2018, Afterpay had over 2.5 million registered users worldwide, making it one of Australia’s true technology success stories.
Can the Afterpay Share Price Recover to $20?
Since its reporting season high, Afterpay shares have fallen over 40%. But, some investors still believe the current price is too expensive.
However, other investors like Shane Fitzgerald from Monash Investors think the Afterpay share price could go a lot higher. The Australian Financial Review quoted him as saying:
“I can tell you if they can replicate the success here in Australia in the US, this company is worth 20, 30, 40 – I don’t know, a lot more than what it’s currently trading.” That could be music to an Afterpay shareholder’s ears.
The USA Opportunity Is…
At the end of October 2018, the millennial-focused company said it had over 300,000 US consumers and 900 retailers using the Afterpay app. Plus, it said another 1,300 retailers had signed agreements.
The above numbers translated to over $115 million of underlying sales processed through the app to the end of October 2018. The Afterpay bulls say this could be the start of something big…
Afterpay itself has outlined how large the USA opportunity could be. And it said the addressable market of the retailers who are already live in the US was equivalent to the total online apparel market here in Australia.
However, I think one main difference between Australia and the USA is that Afterpay is a well-known brand in Australia with a high single-digit, if not a low double-digit, market share. In the US, Afterpay is brand new.
Is Everything Going to Plan?
Within the first six months after rolling out in the US, Afterpay said it had achieved what took around two years to achieve in Australia. But, Afterpay does already have some working relationships with Australian retailers that operate in the US, and US retailers whose local Australian subsidiary uses the service.
Having said that, US ‘influencers’ like the Kardashians are spreading the word about Afterpay on their social feeds and adding the service to their products. So Afterpay could turn out as well as Monash’s Mr Fitzgerald is hoping.
And valuation?
Using traditional metrics like price-earnings ratios and multiples of sales and cash flow, Afterpay shares trade at an expensive valuation.
Therefore, it appears investors who are buying Afterpay shares today are expecting the US (and UK) expansion to go quite well. In my view, there could be better-priced opportunities out there, like the shares in the free below report.
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