Apparently we like payment companies. Almost all of them. The ability to grow revenues at 2x cost growth and huge TAM is difficult to ignore. Afterpay is a leader in ANZ, and is early in exporting its product to the much larger U.S. market.
Afterpay’s product has obvious and valuable benefits, both to merchants and consumers.
Afterpay has attractive economics with LTV/CAC of >30x, as marketing is mainly done by the merchants.
The moat is strengthening, and could become very strong due to network effect.
We like Afterpay’s momentum to grow income at 50-70%pa over the next few years as it penetrates the U.S. and UK markets.
The key risk we see is execution, rather than regulatory or credit risk implicit in Afterpay’s model.
Potential Upside: A$57 (+74%)
Sensible Downside: A$23 (-30%)
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