- Australian stocks rallied with the growing optimism on the Australian recovery
- Afterpay after gaining $0.61 on Tuesday saw an MTD growth of around 56% on 26 May 2020
- Afterpay crossed $50 mark for the first time
- The strong half-yearly performance and the growing number of customers in the US has aided towards APT stock growth
- Recently, the WeChat group, Tencent Holding became a substantial shareholder in Afterpay
- Afterpay is set to be included in the MSCI Australian on Friday this week
The reopening of the Australian businesses and resumption in economic activities is contributing to rekindling hopes in the revival of the Australian economy. On 26 May 2020, S&P/ASX200 index rose by around 2.93% and ended the market session at 5780 points as the positive momentum picked its pace.
Amidst the garnering optimistic sentiments, Australian Fintech Player, Afterpay Limited (ASX:APT) appears to be soaring high on the stock market front as its share price first-ever crossed the $50 mark on last Tuesday of May 2020. The stock showed the intraday high of $50.01 but declined as the day progressed. APT stock last traded at $49.11 per share, increasing by 1.258% from its last close, on 26 May 2020.
The stock escalation leading to the rise in the weighting of the Company has assisted Australia’s digital payment platform to give an MTD return of ~56% on Tuesday. The current market capitalisation worth $12.96 billion (as on 26 May 2020) has allowed the Company to get past to some of the ASX Top 50 stocks, thereby further ameliorating its prospects to enter S&P/ASX 50 index. The buy-now-pay-later Company now has more market capitalisation than real estate Scentre Group (ASX:SCG), energy-related stocks such as Santos Limited (ASX:STO) and AGL Energy Limited (ASX:AGL).
While Australian recovery from the Covid-19 has fuelled the stock movement, Afterpay stock is picking up tremendously higher momentum owing to the world’s dependency on tech-platforms for staying afloat amidst the crises.
The holy grail of the current time, anti-coronavirus drugs are still in the discovery process, which only means that in the coming time, the demand for digital innovations would sustain high. Stocks such as WiseTech Global Limited (ASX:WTC) and Appen Limited (ASX:APX) rose by over 27%. Meanwhile, other tech-related stocks such as Computershare Limited (ASX:CPU) and Altium Limited (ASX:ALU) have also given a month return of over 11%.
Afterpay further went ahead to break away all the shackles clouding the investor’s sentiments amidst the Covid-19 crisis as its stock rose by three quarters (around 75%) in the past one month on 26 May 2020.
So, what is giving the competitive edge to the Afterpay in the current volatile stock market scenario? Let us look at the key factors that are assisting Afterpay to glide high amidst the present time.
Robust Financial Performance
In the world of Buy-now-pay-later, Afterpay’s performance in the Australian market is providing backing to its further progressive movements. As per the latest Half-yearly results for the period ending 31 December 2019, Afterpay showed a significant rise in the active customers and active merchants by 134% and 86% respective in 1H19 compared to 1H20.
At the same time, the underlying sales of the Company grew by 109%. The drastic increase in both the sales and the customers promises a compelling future for the company. In addition, transactions worth $2.4 billion were processed through Q3 FY20, providing an increase of 354% over the same period in FY19.
Source: APT ASX Announcement
Tencent Holding Becomes Substantial Holder at Afterpay
WeChat and QQ platform holder, Tencent Holdings Limited became a substantial shareholder of Afterpay. Hong Kong Stock Exchange-listed Tencent specialises in the value-added internet services such as Fintech services, digital entertainment, online advertising, and cloud-based services. The strategic partnership focusses on the long-term value potential for Afterpay’s shareholders.
Anthony Eisen and Nick Molnar, Afterpay co-founders, indicated that collaboration would assist the Company in areas such as “technology, future payment options and geographic expansion”.
Active customer growth in the US
Australian fintech company on 21 May 2020 also reported substantial growth in its US customers with the active number of active shoppers reaching five million marks. Meanwhile, around nine million consumers in the US have joined Afterpay platform. Covid-19 scenario and the demand for digital payments has further escalated the demand in the US as the Company from January and February witnessed around 30-40% increase in the weekly run rate.
Over 15 thousand brands and retailers are either offering or in the process of providing Afterpay services. The platform taking away the shoppers worry concerning hefty interest charges and fees on the credit payments has nudged the app popularity in the forward direction.
Forthcoming inclusion to the MSCI Australia index
Afterpay is set to be included in the MSCI Australian index, which is further giving a boost to the current stock movement of the company. The addition to the index is planned for Friday in the current week on 29 May 2020. Designed for measuring large and mid-cap performance, Australia’s MSCI index with 69 constituents covers ~85% of the Australian free float-adjusted market capitalisation
Leading BNPL Platform
The Company surely enjoys its strong position in the Australian landscape that has served as the foundation to build investor’s trust. The increasing adoption of digital buy-now-pay-later services has been augmented by the growing adoption of the digital trends and rising focus of the Australian to manage their personal finances. The Company with the ever-increasing figures and the strong market potential has come under the investor’s radar.
Covid-19 led social distancing and lockdown has served as a catalyst to boost the performance of the digital payments and buy-now-pay-later services. With the increasing number of financial concerns, people are turning towards the interest-free services that also adds convenience to the shopping. It would be interesting to note what directions the Company takes in the coming time.
(NOTE: Currency is reported in Australian Dollar unless stated otherwise)
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