By now, most ASX investors will be familiar with Afterpay Touch Group Ltd (ASX: APT), one way or another. Even if you've never owned Afterpay shares, its stunning ride over the last few years would have no doubt grabbed most investors' attention at some point.
For some perspective, it was only April last year when you could pick up APT shares for $5.45 – and if you trek back even further to June 2017, you could have snared some for just $2.95. Considering Afterpay shares are today swapping hands for $30.34 (at the time of writing), you're looking at some impressive gains in a very short space of time.
But how much further does this BN-PL master have to run? Its stock price has no doubt made Afterpay bulls a very happy bunch. But we are now at a point where this company is valued at $7.71 billion – and still not profitable. Still, things are definitely heading in the right direction, with Afterpay recently reporting that revenues in the June quarter were up 94% year-on-year
What's ahead for Afterpay?
I'm very bullish on Afterpay – but let's put things in perspective. The largest payments companies in the world are Mastercard, Visa and American Express Co., with Chinese giants Tencent and Alibaba also commanding a fair chunk of market share in Asia.
Mastercard and Visa are valued at US$264.85 billion and US$391.9 billion, respectively. Both turn over tens of billions in revenue every year, just by slightly clipping the ticket of every transaction done through their cards. This model is similar to Afterpay, so if Afterpay can continue to scale effectively, this is the kind of ballpark we might see it in one day. But it's a big if.
Another under-appreciated aspect of Afterpay's business model is the data it can collect. The company knows exactly what its growing army of users is buying – which I think gives it plenty of ammunition to increase earnings down the road. Data is often referred to as the 'new gold' for its value in our modern age – just look at how successful Facebook and Alphabet have become.
Foolish takeaway
I love Afterpay as a company. I think if it can continue to successfully carve out its niche in the BN-PL space (both here and overseas), the future is almost limitless from its current valuation. Its ability to harvest its consumers' data is also a potential winner for the company. However, I don't particularly like its current share price and lack of profitability, so Afterpay remains in the 'wait' column for me.
