The Afterpay Ltd (ASX: APT) share price is going to be on watch this morning after releasing its FY21 first quarter update to investors.
More strong global growth
Afterpay revealed a number of exciting growth numbers for the first three months of FY21.
It said that it had a strong underlying sales performance in all regions. Underlying sales went up 115% to $4.1 billion. This was also 9% higher than the underlying sales achieved in the fourth quarter of FY20.
In terms of its annualised underlying sales growth, the run rate has reached $16.4 billion, up from $15 billion in the fourth quarter of FY20.
Afterpay was happy to report that its merchant revenue margins “remained firm” in the first quarter of FY21 and continued to be similar to the FY20 margin.
The buy now, pay later company said that the trend of lower gross losses has continued throughout the first quarter with customer default payments remaining below historical rates in all regions. That meant the net transaction losses as a percentage of underlying sales also remained low.
Based on the consistent revenue margin, and strong losses position, the net transaction margin was maintained in the first quarter.
Active customers increased globally by 98% to 11.2 million. The US now has over 6.5 million active customers.
Active merchants rose by 70% to 63,800. A number of ‘major enterprise retailers’ launched in October, just in time for Black Friday, Cyber Monday and Christmas.
Afterpay reported that merchants with over $10 billion of total addressable online sales went live in the US during the first quarter. Customer numbers are benefiting from this, with an 18% increase in the daily average number of new customers in the month to date, compared to the FY21 first quarter average.
Afterpay also revealed which generations are delivering most of the like for like sales growth. Millennials delivered 45% of growth, Gen X was responsible for 25% of the growth and Gen Z delivered 24% of the growth.
Other interesting developments
The launch into Canada has “progressed well” with a number of large retailers now live, integrating or signed including Aritzia, Lush, Ardene and Goop.
Time to buy Afterpay at this share price?
Afterpay continues to deliver excellent growth of underlying sales, active customers and active merchants.
The fact that its revenue margins remain resilient and its losses are low is a great sign. It’s hard to say if that will be the case in a year’s time, but it’s very good for shorter-term profitability.
Afterpay is doing a great job of becoming a global payments player. I’m just not sure what a good price to pay for Afterpay is. Are investors meant to just buy and hope that the market keeps paying attention to metrics that don’t involve making a net profit?
I couldn’t bring myself to buy Afterpay shares at around $100, or even $90. There are other ASX growth shares that I think make more sense such as Pushpay Holdings Ltd (ASX: PPH) which is already making a profit and growing strongly.