The Splitit Ltd (ASX: SPT) share price is on the rise today after the buy now, pay later (BNPL) provider announced a partnership with Mastercard. The multi-year agreement is intended to accelerate the global adoption of Splitit’s instalment solution. 

At the time of writing, the Splitit share price is up by a whopping 33.33% to 88 cents per share.

What does Splitit do?

Splitit provides a payment method solution that allows customers to pay for purchases with an existing debit or credit card by splitting the cost into monthly payments. Unlike competitor Afterpay Ltd (ASX: APT), Splitit does not itself extend credit to customers. Its solution enables merchants to offer customers an easy way to pay for purchases in monthly instalments with instant approval.

What does the Mastercard agreement mean for Splitit? 

The agreement with Mastercard allows Splitit to integrate its instalment solution with Mastercard’s suite of technology as a network partner. This will enable merchants to deliver seamless and secure customer checkout experiences, both in person and online. 

Commenting on the new agreement, Splitit CEO Brad Paterson stated:

This is a fantastic way to broaden distribution of our solution, leveraging Mastercard’s incredible global reach, and build out a range of instalment services. It’s a major plank in our strategy to grow through strategic partnerships and make Splitit a household name.

Splitit and Mastercard will jointly develop instalment and related products. There are plans to launch pilots across 3 markets ahead of a global rollout.

“The partnership with Splitit will help drive higher transaction volumes for businesses and deliver budgeting solutions in the moment customers are seeking them,” said Mastercard’s Executive Vice President of Global Merchant Solutions and Partnerships. 

How has the Splitit share price performed?

The Splitit share price has tripled since its March low. As a result, the company was added to the All Ordinaries Index (ASX: XAO) last week, following the quarterly index rebalance by S&P.

Splitit reported record monthly merchant sales volumes of US$25.8 million in May, up 39% from April and 321% compared to May 2019. Splitit’s total unique shoppers surpassed 290,000 in May, up 18% from the end of Q1 FY20.

The company also reported merchant numbers increased by 12% over the same period to 964. Its average order value also climbed, reaching US$939 in May up from US$737 in Q1 FY20. Its accelerated growth in May was driven by new large merchants onboarded in recent months. 

Foolish takeaway

BNPL providers have been among the ‘winners’ of the coronavirus pandemic, as lockdowns have seen e-commerce expansion accelerate. Merchants are also actively pursuing strategies to improve conversion rates and Splitit is seeing growth in its share of checkout. 

More reading

• ASX 200 down 1.3%: Big four banks tumble, Afterpay tipped to go higher
• Has the Afterpay share price become too expensive to buy?
• Why A2 Milk, Afterpay, Mesoblast, and Temple & Webster are pushing higher
• 2 ASX shares to buy for beginners
• Next phase of bull market could see ANZ Bank outperform Afterpay

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. 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 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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