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.
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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.
