AfterpayTouch (APT AU)

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%)

Link to Research