Times are tough for the Afterpay Ltd (ASX: APT) share price, which is currently fetching just $85.90 at the time of writing. It was only a little over a week ago that the company's shares were trading at around the $100 mark. And a month ago, Afterpay shares were fetching close to $130 apiece.
Afterpay is certainly not alone in its partial fall from grace. Fellow buy now, pay later (BNPL) shares Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX: SZL) have also experienced substantial falls of late amid a wider sell-off across the tech sector.
While sentiment for Afterpay and its cohort might appear to have turned somewhat sour, analysts at Macquarie believe Humm Group Ltd (ASX: HUM) could outperform.
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Humm, a profitable BNPL company
Unlike many of its BNPL counterparts, Humm is currently profitable. In 1H21, the company delivered a statutory net profit after tax of $38.6 million. During the same period, Afterpay delivered a statutory loss after tax of $79.2 million.
Humm reported its third-quarter results on Wednesday, in which the company delivered record transaction volumes of $100.8 million for its BNPL segment during the month of March.
Humm's commercial and leasing segment also delivered a strong volume improvement, up 61.7% on the prior corresponding period to $142.2 million.
This strong result was offset by a weak performance for its Humm's Cards ANZ segment, where volumes were down 26.5% to $264.8 million. According to Humm, an improvement in this segment is expected in the near term as spending is returning to key volume categories.
The company pointed to the United Kingdom and Canada as significant opportunities for its differentiated offering in bigger-ticket, longer-term instalment plans. It intends to enter both markets in the near term with a focus on the home and home improvement, health care, automotive, and luxury retail sectors.
Macquarie thinks Humm shares could outperform
Macquarie has come out with an ambitious outperform rating and $1.30 target price for Humm this morning.
This compares to its note on 20 April in which it declared a neutral rating on Afterpay with a $120 target price.
Macquarie forecasts FY21 earnings per share of 16.40 cents and a dividend per share of 3.40 cents from Humm. With the Humm share price trading at 94 cents at the time of writing, this would put the company on a price-to-earnings ratio of just 5.7 times FY21 estimates.
