Here's what Citi thinks about the Afterpay (ASX:APT) share price

The Afterpay (ASX: APT) share price is down 30% from its record highs in February. Here's what Citi thinks about the BNPL company today

| More on:
ASX shares broker downgrade three buttons indicating thumbs up, neutral and thumbs down broker ratings on ASX share market

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Afterpay Ltd (ASX: APT) share price has slumped 30% from its record all-time highs of $160.05 set on 11 February.

While investors might eye the recent weakness as an opportunity to buy discounted Afterpay shares, here's what Citi thinks about the Afterpay share price. 

Citi neutral on the Afterpay share price 

Citi believes the latest round of stimulus payments in the United States is a positive for the buy now, pay later (BNPL) sector as it could support an increase in consumer spending. The first round of the US$1.9 trillion relief package is expected to reach bank accounts as soon as this weekend. 

The broker also pointed to data showing that Afterpay's US website visits grew more than ~91% year-on-year in February, but the growth rate is slowing from ~106% in January. While February figures were good, the broker believes the company is underperforming its rival Zip Co Ltd (ASX: Z1P). 

Taking a look at both company's half-year results, Zip did appear to deliver higher percentage growth across all key metrics. Afterpay recorded a 106% increase in underlying sales to $9.8 billion, an 80% increase in customers to 13.1 million and a 73% increase in active merchants to 74,700.

On the other hand, Zip delivered a 141% increase in transaction volume to $2,320.6 million, a 217% increase in customers to 5.7 million and an 82% increase in merchants to 38,500. 

As a result, Citi retained a neutral rating with a $124.80 target price. 

The Afterpay share price in 2021

While Zip might be growing faster than Afterpay, the company has several exciting global expansion opportunities to drive its growth and global retail relevance. 

Afterpay is ramping up its in-country and cross-border merchants in Canada. It noted several major retailers either contracted or integrating into Canada. The region currently has an underlying sales run rate of approximately ~$90 million based on January 2021 trading.

Today, Afterpay co-CEO Nick Molnar announced on LinkedIn that the company's European subsidiary Clearpay would launch across Spain, France and Italy. Afterpay's half-year results noted that it was working to build the tech stack to launch into 4 new countries, with more than $1 billion pipeline of global merchants in the process of contracting for the EU.  

Afterpay also has a new stand-alone banking app expected to launch in Q1 Fy22. Afterpay Money is a money management app that focuses on providing insights and features to help users manage their money. Users can treat the app like a traditional banking app with features such as a linked debit card and digital wallet. 

More on Share Market News

Woman in celebratory fist move looking at phone
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

These ASX 200 shares could rise 20% to almost 30%

Analysts are tipping these shares to deliver big returns over the next 12 months.

Read more »

A young woman carefully adds a rock to the top of a pile of balanced river rocks.
Share Market News

Here's how the ASX 200 market sectors stacked up last week

Energy and utilities stocks led the way last week with 4%-plus gains.

Read more »

Animation of a man measuring a percentage sign, symbolising rising interest rates.
Share Market News

Here's when Westpac says the RBA will now cut interest rates

Will borrowers need to wait until the middle of next year for relief? Let's find out.

Read more »

Boys making faces and flexing.
Opinions

3 ASX 300 shares to buy and hold for the long run

I believe these stocks have loads of growth potential.

Read more »

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »