The Afterpay Ltd (ASX: APT) share price is the gift that keeps on giving; soaring an eye-watering 500% since its March lows and up 46% since its February highs. As it continues to push uncharted territory, is the Afterpay share price becoming too expensive? 

Buy now, pay later ‘land grab’ 

Buy now pay later (BNPL) players are in a ‘land grab’ for international expansion and acquiring more merchants across a broader range of sectors. In Australia alone, there are almost a dozen BNPL offerings, all with slightly differentiated products and backed by some of the biggest financial and non-financial companies. The continued merger and acquisition activity and the broadening of its international footprint will see more money flow into the sector. I believe that as long as money continues to flow into the BNPL space with companies acquired at today’s elevated valuations, the Afterpay share price is likely to stay higher.

Afterpay from a valuation perspective 

To put it simply, it’s very hard to value Afterpay let alone any fintech-related company. In FY19, the company generated $264.1 million in revenue and a net loss after tax of $43.8 million. Even if Afterpay’s FY20 revenue were to double (which it probably will), that would still value the company at 30 times revenue!

Afterpay and Zip Co Ltd (ASX: Z1P) currently have a market capitalisation of approximately $15 billion and $2.5 billion respectively. In Q3 FY20 Afterpay generated $2.6 billion in sales with 8.4 million active customers and 48,400 active merchants. In the same time period, Zip generated $1.1 billion in sales with 1.9 million active customers and 22,700 merchants.

Afterpay is 6 times bigger than Zip by market capitalisation. However, Zip’s metrics are highly relevant and after its QuadPay acquisition, within an arms reach. By comparison, Afterpay could look a little overvalued compared to Zip.  

What will power the Afterpay valuation moving forward is the speed at which it will grow its US market share. The US represents the world’s largest retail market, some 15 times larger than Australia. The company is already making significant strides forward, achieving 4.4 million active customers after 2 years in the US market. 

The power of private equity 

Tencent’s substantial shareholding says a lot about where Afterpay is going. The Chinese tech behemoth has a phenomenal track record of investing and profiting from high growth companies across a broad range of sectors. Some familiar names include a 5% stake in Tesla and 7.5% stake in Spotify. Tencent is here to make money, and it could just be the beginning for its Afterpay stake. 

Worth buying in at the current Afterpay share price?

It is very challenging to buy Afterpay at today’s prices. I would hold my Afterpay shares if I was an existing holder. However, I believe it is too expensive for new investors to buy at the current Afterpay share price. 

More reading

• Why A2 Milk, Afterpay, Mesoblast, and Temple & Webster are pushing higher
• 2 ASX shares to buy for beginners
• Why Zip Co and these All Ords shares have doubled in 12 months
• Next phase of bull market could see ANZ Bank outperform Afterpay
• 5 ASX shares that would’ve made you a fortune in 5 years

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) looks set to follow the lead of U.S. markets and drop lower today. In late morning trade the benchmark index is down 1.2% to 5,918.9 points.

Four shares that have not let that hold them back today are listed below. Here’s why they are pushing higher:

The A2 Milk Company Ltd (ASX: A2M) share price has continued its positive run and climbed almost 4% to $19.83. Investors have been buying the infant formula and fresh milk company’s shares this week following a positive broker note out of UBS. According to the note, the broker has retained its buy rating and NZ$22.00 (A$20.64) price target on the infant formula company’s shares. It believes there is some upside risk to its earnings guidance for FY 2020.

The Afterpay Ltd (ASX: APT) share price is up 2% to $59.05. This morning analysts at Ord Minnett retained their buy rating and almost doubled the price target on the payments company’s shares to $64.70. It believes the buy now pay later provider will have almost 10 million active customers using its platform by the end of the financial year.

The Mesoblast limited (ASX: MSB) share price is up 2% to $4.05 despite there being no news out of the biotech company. However, next week Mesoblast will be added to the ASX 200 index. This could have led to increased demand for its shares from index tracking ETFs and fund managers with certain investment mandates.

The Temple & Webster Group Ltd (ASX: TPW) share price has jumped 9.5% to $5.49. This morning the online homewares retailer released a business update which revealed that it continued to experience strong demand in May. As a result, second half sales were up 90% on the prior corresponding period at the end of last month. Financial year to date, its operating earnings are up 668% to $7.1 million.

More reading

• Has the Afterpay share price become too expensive to buy?
• 2 ASX shares to buy for beginners
• Temple & Webster share price jumps 10% after reporting bumper sales growth
• Why Zip Co and these All Ords shares have doubled in 12 months
• Next phase of bull market could see ANZ Bank outperform Afterpay

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of A2 Milk and AFTERPAY T FPO. The Motley Fool Australia has recommended Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why A2 Milk, Afterpay, Mesoblast, and Temple & Webster are pushing higher appeared first on Motley Fool Australia.

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Beginners often enter the stock market and start looking for ASX shares to buy when we are in a bull market like right now. They think that no matter what people are buying, almost everything appears to be going up in value. I first started investing after the 1987 crash, but I got really active during the dot-com bubble. For some reason, I thought Fedexing dog food around the country would be a winning formula! 

I believe that just as it did then, this bull run will come to an end and that eventually, all bubbles burst. So which shares should beginner investors consider buying in this volatile market? Should they bet on the shooting stars like Afterpay Ltd (ASX: APT)? Or maybe just hide out in bona fide blue chip shares like the Commonwealth Bank of Australia (ASX: CBA)? What is the best course of action?

First, take it easy

You’re not going to become a millionaire in a day or even a year. However, if you choose the right shares to buy, it’s possible you could become one in ten years – just not tomorrow. 

On that note, I believe Domino’s Pizza Enterprises Ltd. (ASX: DMP) is one of the stand out performers of the year so far. The Domino’s share price has beaten the S&P/ASX 200 Index (INDEXASX: XJO) over the past five years. This year it is up by 22.6% year to date. In addition, from its low point on 19 March, the Domino’s share price has risen by over 50%.

With an average 28% price increase every year over the last ten years, I think this is a solid share with a lot of strong years of growth ahead of it. 

Shares to buy for growth

I think Kogan.com Ltd (ASX: KGN) is another great ASX share for beginner investors to consider. Kogan is a highly successful eCommerce company and a great story of Australian entrepreneurialism at its best. Some investors are concerned about the impact of Amazon.com on the Kogan share price. However, I feel this is a misplaced concern. Kogan does a lot more than sell electronic devices and white goods online. 

It also sells furniture and insurance, as well as mobile phone and internet plans. Not only that, but since Kogan also manufactures its own products, the company actually sells them on Amazon!

Kogan.com has increased its sales revenues by around 14%, on average, every year over the past three years. In a period of just four years, a purchase of Kogan shares has returned its investors more than 9 times their initial investment. 

Foolish takeaway

I believe both Domino’s and Kogan shares represent solid, long-term buys for beginner investors. They are reasonably priced and offer investors a good chance of continued share price growth over time. Both companies have good track records of achievement and have proven they can survive throughout a crisis. 

More reading

• Has the Afterpay share price become too expensive to buy?
• Why A2 Milk, Afterpay, Mesoblast, and Temple & Webster are pushing higher
• Why Zip Co and these All Ords shares have doubled in 12 months
• Next phase of bull market could see ANZ Bank outperform Afterpay
• Is the Macquarie share price a solid buy today?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon and Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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