Good work
@vboy.
I am mainly looking at google trends, although I don't think it is completely reliable. With the new regional breakdown and being able to search across time periods (4 hours, 7 days, 30 days, 1yr etc), you can actually get a feel for the impact Afterpay is having, compared to the likes of Sezzle. For instance the interest in Minnesota (Sezzle's base) is nearly 50-50 with Afterpay in the last week, in under 2 weeks since Afterpay's launch....this certainly bodes well for Afterpay.
Interesting to note that urban outfitters is growing significantly in the US. They released their earning calls 2 weeks ago and Afterpay got specific mention (albeit a long call):
"Other recent site enhancements include the addition of two alternative payment methods – Apple Pay and Afterpay. The latter has recently entered the U.S. market from Australia with URBN as their American launch partner. Afterpay allows customers to purchase and receive products and then pay for them over time with no interest charges or credit checks. If U.S. customers behave similarly to those in Australia, this service could raise our conversion rates and boost average order values."
URBN are also growing significantly (+13% yoy growth) and will likely exit 2018 with revenue in the order of 4B.
In terms of competition, there have been a number of developments with Sezzle. They recently raised about 10M US and opened up a San Francisco office. They have had a huge increase in the number of stores in their directory (now 750), but they don't seem to have the calibre of merchants that Afterpay does. Also they charge a flat 6%, which may limit uptake amongst bigger brands. They have about 30 FT employees to Afterpay's 250, of which about 15 are based in the US.
Irrespectively, it is really important that Afterpay launched now as Sezzle looked like it was starting to take off. If you go back through Sezzle's history it is pretty clear that their business model was not working, until they literally copied Afterpay's model sometime between March and September 2017. Interviews with their founder essentially admitted as much. They have also literally copied everything from website design to marketing strategy (#sezzleit), which is pretty frustrating as an Afterpay holder. It is really important that Afterpay executes quickly and effectively in next 2 months to ensure that this ends up a global rather than an Australasian story. Key competitive advantages should be back-end technology (touch), better access to capital, better VC backing (Matrix) and market learning from Australia/New Zealand whereas Sezzle has the advantage of better regional understanding. It is important to note that even Facebook did not win in Russia with a well equipped local competitor so it is not a guarantee that Afterpay will win. The other option is to just buy Sezzle outright,which might be the lowest risk strategy.
I have never been part of a story that has been growing this quickly before so I am very curious as to what the exit rates for CY18 are going to be in terms of TTV and revenue. My guess is north of 4B TTV (which equates to 160m revenue), which if executed with no deterioration of bad debts would I suspect give a valuation in the vicinity of 2.4-5B ($11-22/share). It is just very hard to forecast this with any degree of accuracy given the lack of clarity regarding how big the in-store opportunity is, progress in NZ and now progress in the US. Additionally, if there is rapid progress in US, I would favour starting to plan for entering other markets before the end of CY18 to quickly establish a monopoly around the world for this payment mechanism. Additionally US takeoff, if it occurs, will definitely mean that other competitors in the payment space will make a move, although it is unclear to me how nimble these large organisations can be. On the Visa call recently, they did not that debit transactions were growing very quickly, which corresponds to what Afterpay have been espousing.
Anyway this is a long-term hold for me, and after recent gains is now my 2nd largest position. I have no intention of selling unless there is tangible evidence of business deterioration. Will be interesting to see how it plays out. For those new to the stock on this forum, I suggest you go back and look through the myriad discussions on the thread under AFY, TCH regarding the various threats to the Afterpay business model and how they have panned out over the last couple of years!
