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APT afterpay limited

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Objective analysis: COVID-19 positives, page-8

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StefanF

5,550 Posts.

1396

12/05/20

17:13

Post #: 44579542

Originally posted by upside_down ↑

There are a few unknowns at play here.

The shift to e-commerce, how permanent will this be? Once all stores are reopened, I'd imagine a dip in ecommerce spending, before it regains its long term growth trajectory.

What this means for Afterpay: a potential drop in volumes if enough consumers shift back to spending in store.

The longer term impact of government benefits, and what happens when they are reduced. The below chart shows recent spending has ticked up to a much greater extent for those receiving the supplement. The $550 fortnightly supplement just started in that week, and is currently set to continue until September. What happens after? Also what happens in the meantime? Will there be an increased level of spending while the supplement remains? Or was this sharp rise last week just a result of pent-up demand?

For Afterpay: In the short term, if the supplement receivers continue spending above norm, this will be a positive for Afterpay! In the long term, what happens when the supplement is removed and Jobseekers' income is effectively halved? Do they rationally budget for this and limit their spending, or does it catch them out and they are unable to pay back their debt? Does the government raise Jobseeker permanently? That would be a benefit for Afterpay.

@StefanF those categories provided by illion & AlphaBeta do not seem to cover all spending categories. Afterpay's bread and butter is clothing, footwear and beauty, which don't seem fully covered.

CBA's latest tracker shows the following for fortnight ended 1st May. It is not directly comparable to illion's due to a timing difference, but it does show a large drop persists in clothing and personal care. This likely would not have impacted Afterpay too much for now, as CBA says online sales in general are up 110% YoY. The question is, what happens when people start shopping in-store again, do we see online go back down a little? And does clothing & personal care spending remain subdued especially due to unemployment and general spending caution? The treasurer today tipped a higher savings rate going forward due to consumer caution. https://www.channelnews.com.au/treasurer-flags-sobering-gdp-drop-largest-on-record/

Column 1 Column 2

0 Category % change from the same period last year

1 Clothing
-50%

2 Personal care
-41%

3 Transport
-34%

4 Recreation
-29%

5 Medical care and health
-16%

6 Alcohol
-12%

7 Food
+5%

8 Household goods and furnishings
+35%

https://www.commbank.com.au/guidanc...ata-looks-less-bad-than-a-few-wee-202005.html

Expand

I think a big question mark is, how sticky will customers be who have had to move to online shopping out of necessity. Will a large % embrace online shopping and "stick" to it? Only time will tell, although I'm thinking there are bound to be some stickyness.

I embraced online shopping years ago and never looked back but of course I'm not representative of all Afterpay shoppers. Just a little tiny cog on a mammoth wheel.

I also agree that transaction volume will have to decline from the cohort that have lost their jobs and won't receive support. But will this be offset by new online shoppers? I'm not sure, but that's what I meant when I noted the "net" impact on Afterpay.

APT Price at posting: $41.68 Sentiment: Hold Disclosure: Held

0 Great analysis

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