While pre-reported or implied, Afterpay’s FY21 earnings were 56% below Credit Suisse and 60% below consensus, with one-third of the miss relating to larger-than-expected credit losses and two-thirds relating to higher expenses.
The company reported a merchant fee margin of 3.98% in second half FY21, in line with second half FY20 (4.00%).
While profitability is limited at the moment as Afterpay invests to build a global business, scale, and optionality, Credit Suisse expects this to improve in time.
The broker has lowered earnings estimates by 24%, 9%, and 6% in FY22, FY23, and FY24 for higher expenses and credit losses.
Outperform rating is unchanged and the target is increased to $147 from $133.
Sector: Software & Services.
Target price is $147.00.Current Price is $131.96. Difference: $15.04 – (brackets indicate current price is over target). If APT meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges – negative figures indicate an expected loss).
