Not every industry is affected the same in the face of COVID-19 and some industries are affected in a positive way. This objective analysis looks at what I believe to be two positive impacts on Afterpay. Please note this is not meant to be a "balanced view" as I'm only looking at the positives from COVID-19. There are clearly some drawbacks for Afterpay but these are discussed at length on the forums every day.
Online sales
COVID-19 is a catalyst for online shopping. We know that society was always going to be moving away from brick and mortar stores and most businesses have a plan to transition online in one form or another. So the shift to online isn't anything new. However, an event like COVID-19 acts as a catalyst and suddenly introduces large volumes of people to online shopping and it is likely that the growth projectory of online shopping has increased steeply.
Afterpay has a very strong online presence, in particular overseas. Afterpay's biggest market, the US, doesn't even have instore Afterpay yet so this could see a much larger exposure to the BNPL sector than forecasted. Evidence of this increase and of companies that are benefiting are shown below:
Shopify latest announcement - Share price at ATH
While they acknowledged that there are uncertainties ahead the noted the following "The shift of consumer spending toward online is apparent: the number of consumers estimated to have made a purchase for the first time from any Shopify merchant grew 8% between March 13, 2020 and April 24, 2020, compared to the six-week period immediately prior. Over the same period, the number of consumers estimated to have purchased from Shopify merchants they’d never shopped at before grew by 45% compared to the six-week period immediately prior." https://www.businesswire.com/news/h...nnounces-First-Quarter-2020-Financial-Results
MercadoLibre latest announcement - Recently hit ATH
The Argentina-based e-commerce firm is the largest online sales platform in Latin America, and saw an increase in new users last quarter amid the coronavirus pandemic. Its unique active users grew 30.9% to 43.2 million during the quarter, and its total payment volume rose reached $8.1 billion. Live listings on MercadoLibre’s marketplace reached 267.4 million, a 29.8% year-over-year growth. It "blew away revenue estimates, posting quarterly net sales of $652 million, representing growth of 70.5% year over year". https://www.thestreet.com/investing/mercadolibre-strong-march-quarter-results
Shift in spending
Not everyone is financially affected by COVID-19 and right now even those that are affected, most have government payments helping them get through this hard time. Let's focus on the unaffected people for a second. In the past these people would have spent money on things such as public transport, cinema, bars, restaurant, travel etc. This isn't something that can be done right now and not all of this money is saved. '
Instead there is a shift in the category of spending. Below is a survey that was released yesterday that shows what category have seen declines and what category have seen increases in Australian consumption:
It's important to note that Afterpay does not deal in ANY of the categories that have shown declines in spending. In my personal experience, I've used Afterpay a lot more over the last two months to make purchases such as coffee machine + accessories (ebay Afterpay ftw), nintendo switch and a couple of clothes. When compared to pre-COVID-19 I'm still saving more money now because I'm unable to spend on items such as gym, public transport, restaurants etc.
If COVID-19 turns out to be a "net" positive (acknowledging that it does have some negatives) then the share price being back at ATH would be justified and APT could be ready for the next leg up.
Just some food for thought. As always, please discuss objectively. I'm sure there are other positives that I haven't covered so feel free to add. One obvious one is the lack of competition being able to expand, as an example Z1P had to postpone entering the UK market.
APT Price at posting:
$42.17 Sentiment: Hold Disclosure: Held
