Global consumer default wave is just getting started, page-11

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cutty

3,474 Posts.

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30/03/20

15:27

Post #: 43777837
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Originally posted by Drambuie: ↑

https://www.livewiremarkets.com/wires/capital-preservation-afterpay-in-focus

"Our bad scenario makes the following assumptions:40% of existing customers across the group default between April and August 2020, with intensity peaking around May and June;Late fees are cancelled between April and August 2020 as a gesture of goodwill, resulting in zero late fee revenue in the period of maximum bad debt stress;In 2H20 we assume the business is split roughly 50% ANZ, 45% US, and 5% UK which guides are assumptions on the average merchant fee (3.85%) and processing costs (i.e., -1.2%)."

"With a strong return on capital from repeat, repaying customers, a ‘bad scenario’ year which sees 40% of existing customers default in a five month window results in a total return of -30% on the receivables invested capital. If only 30% of customers defaulted in the same period, return on receivables capital improves to -7%.In a normal year, with customer defaults in line with historic trends, return on capital exceeds 30%. If we assume one ‘bad year’ for every seven, Afterpay’s receivables book stands to generate in excess of 20%+ return on capital for a full cycle. We believe this full-cycle return on capital for the receivables book and global network-effect growth opportunity remains a compelling opportunity for long-term investors. As long as the business is sufficiently capitalised to survive the challenging years ahead, the business will continue to thrive thereafter."

-Unless you have something conducive to add to this, take your pessimism elsewhere, OP.

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I absolutely love the fact you decided to completely ignore the other two commentators on liverwire today who didn't share the overly enthusiastic outlook. With one even putting APT as the stock he feels most pessimistic about.

Anyone can search for articles that support their viewpoint.

You do no favours searching for articles that reinforces your existing viewpoint.

Last edited by cutty: 30/03/20

APT Price at posting: $18.53 Sentiment: None Disclosure: Not Held
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0 Great analysis

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