Want to get on the Afterpay Touch Group Ltd (ASX: APT) bandwagon but feel like now isn’t the right time? There’s another company listed on the ASX that could fill that gap in your portfolio.
Similarly to Afterpay, Pushpay Holdings Ltd (ASX: PPH) provides an online financial payment platform. But despite the similarity in their names, they operate in vastly different sectors.
Here’s what you need to know about the two.
Afterpay vs Pushpay
Afterpay has been one of the first movers in the rapidly growing ‘buy now, pay later’ (BNPL) sector. As a result, the company has been able to develop its brand in the market so well that Afterpay is now being used as a verb.
As Rask’s Cathryn Goh recently wrote:
“Afterpay has become a lifestyle in its viral growth phase, with its brand name even being used as a verb. The term “just Afterpay it” is constantly thrown around, much like how we “Uber” somewhere or “Photoshop” something.”
Similarly, Pushpay Holdings is also an industry leader – just in a different sector. Pushpay provides an online solution for people to donate money to the faith and not-for-profit sector. Typically, churches that use the Pushpay platform see an increase in the amount that individuals donate to their church.
Total Addressable Market
More recently, both Afterpay and Pushpay have consolidated their respective markets in Australia and are now focusing their attention on the much larger American market.
In its FY2019 results presentation, Afterpay outlined a combined total addressable market (TAM) of $6 trillion for Australia, USA and the UK. In fact, Afterpay processed $5.2 billion of payments through its platform in FY19, giving the company revenue of $251.6 million.
According to Pushpay’s FY19 results released 31 March 2019, its revenue increased by 40%, totalling $98.4 million for the company. According to the company, users of Pushpay and similar platforms donated $122.94 billion to religious organisations in the US in 2016. With Pushpay processing US$2.2b for that year, its estimated market share was around 2%.
These numbers demonstrate that both Afterpay and Pushpay could continue to grow revenue at high rates for many years to come.
Afterpay’s rapid expansion into the US and UK in recent times has come at a cost with the company posting a loss of $42.9 million (see Afterpay’s FY19 results here). The same results show that Afterpay currently holds $50 million in debt, which is a reduction of $100 million when compared to FY18. This puts Afterpay in a net cash position of roughly $180 million thanks to a bout of equity raises.
This year, Pushpay achieved its first positive EBITDAF result (with the F referring to foreign currency gains/losses). Additionally, Pushpay broke even on a monthly cash flow basis and the company has almost $14 million in cash and no debt.
Afterpay or Pushpay?
Ultimately, your investment style will determine your decision to buy Afterpay over Pushpay, or vice-versa.
On the back of some successful branding, Afterpay has an opportunity to continue its early success in the US and UK markets. If investors are willing to ride out the volatility of the Afterpay share price and hold the company for the long term, they could see some very healthy gains.
For new investors, Pushpay may be a better investment. As Pushpay has recently become profitable (and has no debt), it may be an easier ride for shareholders looking for a good value investment.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing, Jack has no financial interest in Afterpay or Pushpay shares.