For full disclosure, I own Pushpay shares. And I released it last year as one of my #1 buy ideas to members of our Rask Invest share research service.
Before I get stuck into the meat of these two companies, consider watching this video on Afterpay’s SaaS multiples and metrics. It’s part of our Value Investor Program, which — coincidentally — teaches people to question companies like Afterpay and exactly how to find and do valuations on companies like Pushpay.
Let’s start with today’s ugly duckling…
Afterpay shares fall 33%
Afterpay Touch is the owner of the popular “buy now, pay later” app. As of 2020, Afterpay had over 7.5 million registered users worldwide, making it one of Australia’s true technology success stories. Indeed, while today was a bad day for Afterpay shareholders the company has been one of the ASX’s true success stories over the past five years.
That said, today the Afterpay share price collapsed despite no really meaningful news. Of course, the S&P/ASX 200 (ASX: XJO) or Australian share market fell another 6% today. And, let’s not forget, earlier this week Afterpay provided an update on its funding position which, in the wake of the COVID-19 outbreak is a sensitive issue for most companies.
In its funding update, Afterpay tried to reassure investors about concerns over potential mounting bad debts by saying that it has, “not seen any changes relative to past performance.”
Afterpay also said it has a “strong liquidity position of over $672.1m” and that its debt facilities, which have an average life of 2.1 years, are not subject to traditional debt covenants or rules like other companies might face.
While on the face of it this seemed to be a reassuring move by the company, investors are clearly concerned about the slowing demand for Buy Now, Pay Later products (in the medium term), the potential for rapidly rising bad debts and of course a high share valuation leading into this market fall.
Pushpay bounces 10%
Pushpay is a New Zealand based donation systems and software business for religious, not-for-profits and education providers in the US, Canada, Australia and New Zealand. Pushpay is used by over 7000 churches worldwide. The average gift is $192. Pushpay makes money by charging a subscription fee for its app but also from clipping the ticket on processing donations.
As I loosely expected, Pushpay came to the market today to say:
“Although a number of organisations are temporarily closing their physical premises in response to the spread of COVID-19, Pushpay is seeing a clear shift to digital whereby Customers are utilising its mobilefirst technology solutions to communicate with their congregations.”
That’s good news for Pushpay in the short term because the convenience and usefulness of its app make it a normal solution for churches in the current climate.
“During this time and more than ever, churches are finding that leading their communities toward online services is a necessity,” Pushpay CEO Bruce Gordon said. “We are actively working to help our Customers navigate this time and use it as an opportunity to strengthen connections within their community through digital means.”
Pushpay said it now expects to report its version of operating profit (EBITDAF) of between $US25 million and $US27 million for the full year, when it reports for the period to March 2020. This was up from the $US23 million to $US25 million quoted in previous presentations.
Together with the recently acquired Church Community Builder business, I’m a happy long-term shareholder of Pushpay. That said, of course, even though the business is charging ahead — I expect it to be a bumpy ride for shareholders.
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Disclosure: At the time of publishing, Owen owns shares of Pushpay.