Afterpay outlook: Where Next Following Q3 Update?

How we Got Here

Back in the days when Afterpay (ticker: APT) was a fledgling upstart, the prospect of a dual-listing in the US likely seemed absurd.

Yet as Afterpay began to forge headlong into this huge market, rumblings on internet forums of an inevitable US listing took shape. They were, to be sure, only rumours. Afterpay was expanding into the US, yes, but it barely had a foothold in that market.

The narrative is now decisively different: Afterpay is a global leader in the BNPL space, not some scrappy upstart, the growth the catapulted the company to darling status remains, and the prospect of a US listing looks more concrete than ever.

Q3 at a Glance

This all comes after the company reported its latest set of quarterly (Q3) results, for the quarter ending March 31, in what marked yet another growth oriented period for Afterpay.

On a group level, management said underlying sales rose 123% year-on-year, hitting $5.7 billion in Q3.

This growth was fuelled by a flurry of new customers and merchants, on a group level, increasing 75% and 77%, respectively. Overall, there are now 14.6 million active users and 85.8 thousand active merchants on the platform.

Repeat usage, a key metric for BNPL companies, also remained robust. On a group level, management noted that the top 10% of customers, on average, transact with Afterpay 33 times a year.

Finally, merchant revenue margins ‘remained firm’ during the quarter, though no exact figure was given, a consistent omission during the company’s quarterlies.

Afterpay share price (ASX: APT)

The stock opened higher in response to the Q3 release - at $129 per share - though drifted lower in the first half hour of trade. By 2:03 pm Afterpay was down 0.32% for the session.

Despite elevated levels of volatility in the short-term, over the last year the Afterpay share price has risen an impressive 333%.

Where Next?

As was the case for Zip recently, it was US market growth which stole the show for Afterpay today.

US underlying sales surged 211% in the third quarter, coming in at $2.6 billion, making North America the largest driver of group underlying sales. Oh, and in March the US notched up $1.0 billion in underlying sales, a first for the company.

US customers have also far outpaced Afterpay’s other key geographies, standing at 9.5 million. However, the top 10% of US customers don't use the platform quite as much as their Australian and New Zealand (ANZ) counterparts, transacting with Afterpay on average 23 times per annum vs ANZ, at 62 times per annum.

What’s the point of all this growth anyway? A potential US listing, it would seem.

Management on Tuesday said it was exploring the idea with advisers 'given the US market is now the largest contributor to our business and is expected to continue to grow strongly.'

Besides that, the company noted that with its shareholder base becoming more globally oriented, 'a US listing would further accommodate this growing interest.'

The company did however note that it would remain headquartered in Australia and that ultimately, such a decision would require Board approval. No formal timeline has been set for such an undertaking.

Other points of interest:

• The Afterpay app was downloaded more than 2 million times in Q3
• Customer growth remained strong in April. In the last month and against the Q3 average, there has been 'a ~6% increase in the daily average number of new customers in the month to date (April).'
• Afterpay said it was on track to launch in Germany, via its Clearpay brand, during the first half of fiscal 2022.

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