Afterpay hits new high on user growth in US

Shares in “buy now, pay later” firm Afterpay reached a new high on Thursday, buoyed by strong customers numbers in the US.

Afterpay cofounder and US chief executive Nick Molnar. David Gerarty

Shares in “buy now, pay later” provider Afterpay climbed to a new high on Thursday, buoyed by strong customers numbers in the crucial US market.

The company said it had reached its US target six weeks early. The market darling now has more than 5 million active shoppers in the US, with more than 9 million US customers on its platform.

It said that more than 1 million customers had joined Afterpay in the past 10 weeks since the COVID-19 pandemic took hold, and that it had added customers 30-40 per cent faster every week than it did in January and February.

The company’s new US clients include American Eagle, Birkenstock and The Hut Group.

“At a time in which ecommerce has become the primary way people are shopping, there is a growing interest and demand among consumers to pay for things they want and need over time using their own money, instead of turning to expensive loans with interest, fees or revolving debt,” co-founder and US chief executive of Afterpay Nick Molnar said.

Investors lapped up the news, sending the shares to a record high of $45.17 before closing the day up 2.6 per cent at $44, giving the company a valuation of $11.75bn.

As The Australian reported earlier this month, Afterpay will now look to take on China’s $US2 trillion ($3.1 trillion) e-commerce market thanks to a “deep and long-term business partnership” with Chinese giant Tencent, which emerged with a 5 per cent share in Afterpay late last week.

“Right now we remain focused on growth and momentum in our existing markets, but following our retailers and expanding further globally is of course something we’ll continue to explore,” Mr Molnar told The Australian.

“A strategic investment from a global technology company of Tencent’s calibre isn’t just a testament to our business or our model, it’s a testament to Australia’s growing reputation for fintech and innovation more broadly on the international stage.”

Citi analysts said they saw the potential for Afterpay to enter the Chinese market in partnership with Tencent and leverage the Tencent user base of about 1.2 billion WeChat users.

The incumbent has a 39 per cent market share of third-party mobile payment volumes in China.

Shares in Afterpay had fallen as low as $8.90 in March due to uncertainty caused by COVID-19, but the stock has since rebounded to a position even stronger than before the pandemic.

“Uncertainty that existed in March around the COVID-19 impact on APT has seemingly evaporated, with a large rerating in the stock,” Royal Bank of Canada analyst Tim Piper said on Thursday.

“While the Tencent investment provided a boost to sentiment, the other key driver of the re-rate has been evidence in recent weeks that a large shift to online transactions and eCommerce due to COVID-19 effects has benefited BNPL players. We have seen solid trading updates from other BNPL peers too. Credit performance also remains in check with forward indicators stable as governments roll out large stimulus programs,” Mr Piper said.