Tag: Motley Fool Australia

As you are no doubt already aware, the buy now, pay later (BNPL) sector has tremendously outperformed the market this year. Industry leaders Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) have surged around 750% and 460% respectively from their lows in March and are currently trading near all-time highs.

Despite the huge interest in these BNPL service providers, the FlexiGroup Limited (ASX: FXL) share price is actually trading just over 30% lower for the year. So, given it is the sector’s oldest and most profitable player, why is the FlexiGroup share price lagging its peers and should you buy?

Positive trading update

In a recent trading update, FlexiGroup reported that the company had exceeded 2.1 million customers after adding 380,000 new users in the past 11 months. In comparison, Afterpay had 3.2 million customers on 31 March and Zip had 2.1 million on 31 May.

Over the past 11 months, FlexiGroup also reported that $2 billion in transactions were processed through its ‘humm’ platform, with a 282% surge in online volumes for the 5 months to May 2020. The company attributed this growth to the transformation of its digital offering which has seen over 600,000 app downloads.

Flexigroup also cited the continued expansion of humm and the company’s strategic partnership with Mastercard as key growth drivers. FlexiGroup’s platform now boasts more than 55,000 retailers, including notable brands such as IKEA, Myer Holdings Ltd (ASX: MYR), National Dental Plan and Smiggle.

Has the coronoavirus pandemic impacted operations?

Unlike Afterpay and Zip, Fleixgroup’s platform differentiates itself by offering BNPL services for larger expenses such as home renovations, dental treatment and fertility services. The company provides interest-free repayment options for transactions up to $30,000 over 10 weeks to 60 months.

In late April, FlexiGroup provided a trading update on its operations during the coronavirus pandemic. The company assured investors that 75% of its customers were over the age of 35 with many being homeowners. In addition, Flexigroup highlighted that consolidating over 20 of its brands into 3 offerings has provided the company with additional strength and flexibility.

Flexigroup noted that although BNPL volumes were reduced for discretionary spending, there was a shift towards spending on solar, health and furniture during the lockdown period.

Foolish takeaway

FlexiGroup has operated in the BNPL sector for the past two decades under the brands Ezi-Pay and Oxipay. Last year the company rebranded and consolidated its various platforms into one brand (humm). The strategy behind the rebranding aims to lift the company’s visibility in the sector and increase its accessibility to customers and partners.

In my opinion, despite pioneering the BNPL space, the Flexigroup share price is lagging behind the likes of Afterpay and Zip because it will take time to rebrand and refocus its operations. However, I think there could be long-term value for investors in the company if its focus on larger purchases and new strategic direction prompts a re-rating of the share price.

More reading

• Are Afterpay shares the next Visa?
• ASX 200 falls 0.7%, Qantas and Afterpay make a partnership
• 2 ASX shares I would buy for growth and income
• Afterpay share price pushes higher on Qantas partnership
• ASX 200 edges higher: Afterpay and Qantas join forces, big four banks push higher

Nikhil Gangaram 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. The Motley Fool Australia has recommended FlexiGroup 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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Although the United States is the undisputed leader when it comes to technological innovation, it is worth noting that a number of ANZ companies are making their mark in the world of technology.

Three exciting tech companies that I think are definitely worth considering as long-term investments are listed below. Here’s why I would buy them:

Altium Limited (ASX: ALU)

The first tech share to consider buying is Altium. It is an award-winning printed circuit board (PCB) design software provider which has over 30 years of continuous research and development in PCB design. The company is aiming to leverage this experience to achieve market dominance in PCB design by 2025. Given the quality of its offering, I feel confident Altium will achieve this and generate above-average earnings growth over the next few years. Supporting the core business will be its growing Nexus and Octopart businesses. The latter is a search engine for electronic and industrial parts and has a significant market opportunity.

Appen Ltd (ASX: APX)

Another ASX tech share which I think would be a fantastic long-term option is Appen. It is a global leader in the development of high-quality, human-annotated training data for machine learning and artificial intelligence (AI). The company estimates that the AI market will grow to be worth between US$169 billion and US$191 billion per annum by 2025. This is great news for Appen, as an estimated 10% of this spending is expected to relate to the data labelling that Appen is a leader in. If the company can maintain its leadership position, then I expect it to lead to above-average profit growth for a long time to come. This could mean there is still significant upside for the Appen share price over the 2020s.

Xero Limited (ASX: XRO)

A final tech share to consider buying is Xero. I believe the cloud-based business and accounting software provider is capable of growing its sales at an above-average rate over the 2020s. This is thanks to the quality and growing popularity of its software and its massive global market opportunity. Another positive is the favourable industry tailwinds. A recent study shows that the Cloud Accounting Software market is predicted to grow at a 6.8% compound annual growth rate through to 2025. I feel this bodes well for the Xero share price over the coming years.

More reading

• 2 ASX shares I would buy for growth and income
• 3 ASX tech shares to buy and hold
• Cochlear and these ASX 200 shares could be fantastic buy and hold investments
• Altium and 2 more ASX 200 shares to watch this week
• ASX 200 Weekly Wrap: Afterpay, Tech push ASX 200 back above 6,000

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 Altium and Xero. The Motley Fool Australia owns shares of Appen 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.

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The Carbonxt Group Ltd (ASX:CG1) share price closed yesterday’s trade up 32.43% for the day, thanks to the completion of a successful $2 million capital raising.

What happened?

Yesterday morning, Carbonxt announced it has received firm commitments to raise approximately $2 million (before costs) from leading institutions and investors. Despite the issue price of 16 cents for the 13 million new ordinary shares in the company, the Carbonxt share price closed yesterday at 24 cents. This follows a large increase of 19% last Monday.

The company reported that the placement received very strong support both from new and existing investors. The placement will be used to strengthen Carbonxt’s balance sheet and position the company to accelerate growth into FY21.

In its capital raising presentation, Carbonxt advised that its anticipated FY20 growth did not eventuate, due to a number of factors including extended payments impacting revenue growth. The company provided revised FY20 guidance, with revenue now expected to come in at $16 million, $2 million down on its earlier forecast.

The release also forecast strong revenue growth of 40% or more in FY21, as customers return to levels similar to that of pre-COVID-19. The company expects to be profitable and cashflow positive from 2QFY21.

What does Carbonxt do?

Carbonxt is a cleantech company that specialises in the production of powdered and pelletised activated carbons for use in industrial pollution and emission control.

Carbonxt has recently released a new pellet aimed at removing phosphate from streams. The development of these pellets would eliminate any reliance on third-party and foreign-sourced input materials, contributing to significant margin expansion expected in FY21.

About the Carbonxt share price

The Carbonxt share price fell from its 54 cent high earlier this year down to 12 cents in March. Despite yesterday’s gains, the Carbonxt share price is still down 52% year to date, and 19% lower than this time last year.

More reading

• The FlexiGroup share price is lagging its BNPL peers. Should you buy?
• 3 of the best ASX tech shares to buy in July
• 5 things to watch on the ASX 200 on Tuesday
• Why you should watch these exciting small cap ASX healthcare shares closely
• Why NEXTDC and these high flying ASX shares just hit record highs

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week in a disappointing fashion. The benchmark index fell 0.7% to 6,014.6 points.

Will the market be able to bounce back from this on Tuesday? Here are five things to watch

ASX 200 expected to rebound.

It looks set to be a more positive day of trade for the ASX 200 on Tuesday. According to the latest SPI futures, the benchmark index is expected to open 29 points or 0.5% higher this morning. This follows a very positive start to the week on Wall Street, which saw the Dow Jones rise 1.8%, the S&P 500 climb 1.6%, and the Nasdaq jump 2.2%. Tech shares played a key role in driving these indices higher.

Reserve Bank meeting.

This afternoon the Reserve Bank of Australia will hold its monetary policy meeting and decide whether to cut the cash rate down to zero. According to the latest cash rate futures, the market is pricing in a 62% probability of a rate cut today. This means that a cut is far from certain, but is definitely in play. A rate cut would arguably be a negative for Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four.

Oil prices mixed.

Energy producers including Oil Search Limited (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) will be on watch after a mixed night of trade for oil prices. According to Bloomberg, the WTI crude oil price is flat at US$40.65 a barrel and the Brent crude oil price is up 0.6% to US$4307 a barrel. Positive supply data was supporting oil prices.

Gold price rises.

Gold miners including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could be on the rise after the gold price strengthened. According to CNBC, the spot gold price rose 0.25% to US$1,794.80 an ounce. The gold price climbed higher on the back of surging coronavirus case numbers.

QBE added to conviction buy rating.

The QBE Insurance Group Ltd (ASX: QBE) share price could be on the rise on Tuesday after Goldman Sachs added the insurance giant to its conviction buy list with an $11.26 price target. The broker believes QBE has two medium term opportunities to create value for shareholders. These are upside from putting (potential) excess capital to work and margin expansion from operating leverage.

More reading

• Kogan and 1 other ASX share to buy and hold beyond 2025
• 2 ASX shares I would buy for growth and income
• 2 five-star ASX shares for strong long-term growth
• The most popular US shares that Aussies are buying includes a few surprising names
• Is the Woodside share price a better buy than its ASX energy peers?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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One area of the market which I think is home to a lot of exciting shares is the healthcare sector.

Two that I feel are standouts at the small end of the sector are listed below. Here’s why I think they are worth watching very closely:

Mach7 Technologies Ltd (ASX: M7T)

The first small cap healthcare share to look at is Mach7. It is a medical imaging data management solutions provider which uses software to create a clear and complete view of the patient. This software helps to inform diagnosis, reduce care delivery delays and costs, and, importantly, improve patient outcomes.

While this product alone has a sizeable market opportunity, the company has recently expanded its offering via the acquisition of Client Outlook. The acquisition of this leading provider of an enterprise image viewing technology has increased Mach7’s total addressable market from US$0.75 billion to a sizeable US$2.75 billion. Given that Mach7 generated revenue of $9.1 million in the first half, it clearly has a long runway for growth over the next decade. This could make Mach7 shares a great long term option.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is a healthcare technology company which uses artificial intelligence imaging algorithms to assist with the early detection of breast cancer. It has been growing its market share in the United States at a rapid rate in recent years and currently has an installed software base covering over 27% of U.S. women screened for breast cancer. The sizeable increase in its installed base has led to very strong revenue growth, with the company more than doubling its subscription revenues in FY 2020.

The good news is that Volpara still has a very long runway for growth and is aiming to increase its average revenue per user (ARPU) materially in the future. Management is looking to grow its ARPU to upwards of US$10 per user, up from US$1.04 per user at present. It feels it can achieve this by having radiologists utilise its full product suite during screening sessions. If it delivers on this, then I suspect the Volpara share price will be materially higher at the end of the decade.

More reading

• 10 more top broker ASX share picks for FY21
• Top ASX Stock Picks for July 2020
• 3 exciting small cap ASX shares to add to your watchlist
• Why ResMed and these ASX shares have just hit new highs
• Fund managers have been buying these ASX shares

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 MACH7 FPO and VOLPARA FPO NZ. The Motley Fool Australia has recommended MACH7 FPO and VOLPARA FPO NZ. 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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Although the S&P/ASX 200 Index (ASX: XJO) took a tumble on Monday, it wasn’t enough to stop some shares from charging to new record highs.

Three ASX shares that achieved this feat are listed below. Here’s why they are flying high:

Marley Spoon AG (ASX: MMM)

The Marley Spoon share price hit a new record high of $1.89 on Monday. The meal kit delivery company’s shares have been on fire during the pandemic after lockdowns led to a surge in demand. This strong demand resulted in Marley Spoon reporting revenue of 42.8 million euros in the first quarter of FY 2020. This was an impressive 46% increase on the prior corresponding period. Pleasingly, as a result of this better than expected performance, management advised that it will soon become profitable. It expects to achieve positive operating EBITDA during the second quarter.

NEXTDC Ltd (ASX: NXT)

The NEXTDC share price was pushing higher again yesterday and reached a new record high of $11.24. Investors have been buying the data centre operator’s shares this year after the pandemic accelerated the shift to the cloud and ultimately demand for capacity in its centres. This continued last week with NEXTDC announcing major new contract wins in New South Wales. These new wins have lifted the contracted commitments at its New South Wales data centre facilities by approximately 4MW to more than 36MW. However, if you include contracted expansion options, its data centres in the state are now approaching 60MW. This is more than the total capacity of its S1 and S2 data centres. It will also eat into the S3 data centre’s capacity once that is constructed.

Objective Corporation Limited (ASX: OCL)

The Objective Corporation share price continued its impressive run and hit a record high of $9.49 on Monday. This latest gain means the software company’s shares have now rebounded 240% from their March lows. Investors appear confident the software company’s services will be in demand following the pandemic and have been snapping up shares. Objective has a suite of software that enables secure file sharing, helps government agencies respond to information requests, streamlines and improves processes, and strengthens corporate governance practices. Earlier this month it announced the acquisition of Itree for $18.5 million. Itree is a government regtech solution specialist.

More reading

• 3 ASX tech shares to buy and hold
• These were the 5 best performing ASX shares last week
• Is the NextDC share price still a buy despite hitting an all-time high?
• Altium and 2 more ASX 200 shares to watch this week
• ASX 200 Weekly Wrap: Afterpay, Tech push ASX 200 back above 6,000

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Objective Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Luckily in this low interest rate environment, there are plenty of shares on the ASX paying generous dividends.

Two which I think would be top options for income investors right now are listed below. Here’s why I like them:

BHP Group Ltd (ASX: BHP)

I think this mining giant is a great dividend share to buy. This is because the Big Australian looks well-positioned to generate strong free cash flows in FY 2020 and FY 2021 thanks to its low cost operations and favourable commodity prices.

The latter is particularly the case for iron ore, which is currently trading at ~US$100 a tonne. This compares to the company’s full year cost guidance of just US$13-14 per tonne at its Western Australia Iron Ore operation. Based on the current BHP share price, I estimate that its shares offer investors a forward fully franked ~5% dividend yield.

BWP Trust (ASX: BWP)

Another dividend share that I would buy is this commercial property trust. BWP is the largest owner of Bunnings Warehouse sites in Australia with a total of 68 leases. While having such a reliance on a single customer can be a risk, in this case I see it as a strength. This is because Bunnings is owned by Wesfarmers Ltd (ASX: WES), which is also a major shareholder of BWP. I believe this means it is highly unlikely to do anything that would impact its investment.

In addition to this, given the quality of the Bunnings business and its positive outlook, I feel the risk of rental defaults and mass closures is extremely low. All in all, I think this leaves BWP well-placed to grow its distribution at a modest rate each year for the foreseeable future. For now, based on the latest BWP share price, I estimate that it offers investors a 4.75% FY 2021 yield.

More reading

• ASX 200 Weekly Wrap: Afterpay, Tech push ASX 200 back above 6,000
• 5 things to watch on the ASX 200 on Monday
• 5 ASX shares rated as strong buys by brokers
• 3 ASX dividend shares to buy before the next RBA meeting
• Diversify your portfolio with BHP, ResMed, and Wesfarmers shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers 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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The Biotron Limited (ASX: BIT) share price soared by 30% today, after the biotechnology company released new data regarding the effectiveness of its lead antiviral drug BIT225, used for fighting HIV-1 infections.

The Biotron share price is on a tear this year, up more than 140% since January to 13 cents.

What did Biotron announce?

This morning, Biotron released data on its HIV-1 drug, BIT225. The data demonstrates how BIT225 enhances the immune response to HIV. Biotron commented that the drug is unique in that it not only inhibits the virus but also augments the immune responses against it. 

“The latest results provide key information on how BIT225 directly modifies immune responses to HIV-1 infection. It helps explain the immune changes that we saw in the Phase 2 clinical trial and gives us even more confidence in our product,” said Dr Michelle Miller, Biotron’s managing director. 

According to the report, specific cell markers that usually don’t signal the immune system to attack the virus are instead returned to normal. Furthermore, the drug also increases functionality of the immune response by enabling T cells to more around the body and restore immune function.

These results, coupled with those from the Phase 2 clinical trial, further support the continued clinical study of the potential anti-viral and immunological benefits of BIT225 therapy in combination with standard anti-HIV drugs.

How Biotron is helping to combat COVID-19

It has been an exciting year for Biotron, which announced in March that its HIV-1 drug was able to restore immune function in HIV-1 infections. Furthermore, on 6 February Biotron announced plans to test its compounds against coronavirus, observing at the time it had over 30 compounds with good activity against a range of coronaviruses. Some of these compounds were stated to reduce the levels of coronavirus by 90–100% in infected cell cultures.

Biotron’s expertise lies in the design and development of drugs that target virus-encoded proteins known as viroporins. The company’s scientists were the first to identify and publish data showing that the E protein of the coronavirus is viroporin and a good target for antiviral drugs.

The Biotron share price is down on its 52-week high of almost 19 cents (reached in early February), but at its current price of 13 cents a share is up by 73.33% on this time last year.

More reading

• Have $10,000 to invest? I’d pick these ASX shares
• Are Afterpay shares the next Visa?
• Kogan and 1 other ASX share to buy and hold beyond 2025
• ASX 200 falls 0.7%, Qantas and Afterpay make a partnership
• 2 ASX shares I would buy for growth and income

The Motley Fool Australia has no position in any of the stocks mentioned. 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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Do you have $10,000 to invest? I’d pick the ASX shares I’m going to reveal in this article.

Choosing where to put your hard-earned money can be a difficult task. Particularly with how volatile the share market has been in recent months due to COVID-19.

Here are my picks:

Share 1: PM Capital Global Opportunities Fund Ltd (ASX: PGF) – $2,500

This ASX share is a listed investment company (LIC) which focuses on overseas shares. I think there’s merit in finding LICs which are trading at large discounts to their net tangible assets (NTA) per share but have a relatively large dividend yield.

I think PM Capital Global Opportunities Fund is good value because it’s probably trading at around a 20% discount to the NTA at the end of last week. The weekly NTA update will be released tomorrow. This is a large discount in the LIC sector. 

Some of the LIC’s current holdings are: Cairn Homes, Bank of America, Visa, MGM China, KKR & Co, Siemens and Freeport-McMoRan Copper.

The ASX share has been steadily increasing the dividend over the past few years. Since 2017 the annual dividend has grown annually by 0.2 cents per share. In FY20 the annual dividend seems set to increase to 4 cents per share, up from 3.8 cents per share in FY19. At the current PM Capital Global Opportunities Fund share price it has a projected FY20 grossed-up dividend yield of 6.2%.

Share 2: Bubs Australia Ltd (ASX: BUB) – $3,500

Bubs is one of my main ASX growth share ideas at the moment. The goat milk product business is seeing large demand for its infant formula range.

The business has been growing quarterly revenue at a very good rate for a while now. But the quarter to 31 March 2020 was truly impressive. Bubs’ quarterly revenue of $19.7 million was a 67% increase year on year and a 36% increase compared to the previous quarter. Bubs’ infant formula revenue jumped 137% and Chinese revenue rose by 104%.

I really like what Bubs has achieved over the past couple of years, particularly with securing its supply chain and expanding its distribution footprint.

Good news continues to flow from the ASX share. It recently announced its (cow-based) grass fed infant formula will be sold in 482 Coles Group Limited (ASX: COL) supermarkets. In that same announcement it said that Baby Bunting Group Limited (ASX: BBN) would start selling Bubs’ range of products in 52 stores from May 2020.

I think Bubs is definitely one to watch over the next five years. I’d be happy to buy shares at the current Bubs share price.

Share 3: WCM Global Growth Ltd (ASX: WQG) – $4,000

Many of the best shares in the world are not listed on the ASX. Indeed, the ASX only makes up 2% of the global share market. I think it could be a mistake to miss out on the other 98% of the world.

ASX share WCM Global Growth is another LIC which also targets global shares. It looks for shares with an expanding economic moat, measured by a rising return on invested capital (ROIC). Businesses with a large but static (or declining) moat won’t make the cut.

WCM, a Californian based asset management firm, also looks for a good corporate culture that will enable that share’s economic moat to keep growing.

The ASX share’s investment portfolio has been a strong performer. Over the past two years, after management fees and performance fees, WCM’s portfolio has returned an average of 23.1% per annum, outperforming its global benchmark by 13.5% per annum.

Some of its top holdings at the end of May 2020 include Shopify, Stryker Corp, MercadoLibre, Visa and Crown Castle International.

A useful bonus is that the ASX share recently started paying a dividend. At the current WCM Global Growth share price it offers a dividend yield of 3.1%. It’s currently trading at a 10% discount to the NTA at 26 June 2020.

Foolish takeaway

I think all three of these ASX shares could outperform the local market over the short-term and particularly the long-term. I believe Bubs has great growth potential. The two global LICs are invested in good shares and are valued at attractive discounts to their NTAs.

More reading

• My ASX share of the week
• 3 of the best ASX growth shares to buy for the 2020s
• 3 exciting ASX growth shares to buy with $3,000 today
• These are 2 quality ASX shares to buy with $2,000
• Why I’d buy and hold a2 Milk shares until 2025

Motley Fool contributor Tristan Harrison owns shares of PM Capital Global Opportunities Fund Ltd. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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 has been garnering a lot of attention lately. It could be because this share climbed to yet another new record high last week of $70. It could be because this company’s share price has appreciated more than 700% since its March lows. Or it just could be that Afterpay, with its ‘new way to pay’, is a natural to the spotlight.

But now Afterpay has conquered a $70 price tag, an ~$18 billion market capitalisation and (as it looks likely) membership of the ASX 20 club, some investors are wondering ‘where to from here?’ Or perhaps more opportunistically, ‘how high can Afterpay shares climb?’

As Afterpay is a relatively new company with a relatively new product idea in buy now, pay later (BNPL), it is the sort of company that can be difficult to value and chart a growth trajectory for. But I want to start at the finish line by looking at the largest payments company in the world: Visa Inc. (NYSE: V).

You probably know Visa from its almost universal presence on the credit and debit cards that most people have in their wallet or on their phone.

But don’t let Visa’s tiny logo on your card fool you. This is a gargantuan company with a truly global reach. It’s currently valued at US$416.5 billion (A$598 billion), which is more than 4½ times the size of Commonwealth Bank of Australia (ASX: CBA). Visa makes money by clipping the ticket of every transaction that goes through its payment network. Think about how many people are tapping their Visa cards every day in Australia alone, take it to the world stage, and you get some idea of this company’s dominance.

Is Afterpay the new Visa?

So is this Afterpay’s endgame? To rival Visa, Mastercard and American Express in terms of global presence and market dominance? I’m sure Afterpay would like to think so. But is the runway there for this company?

Well, it’s hard to say. If Afterpay can get to the point where every shop in the world asks you ‘how would you like to pay, cash, card or Afterpay?’, then it will have made it. But how far off is this?

In Australia, not far in my view. Yes, it does have to contend locally with rivals like Zip Co Ltd (ASX: Z1P) and Openpay Group Ltd (ASX: OPY). But I think retailers in this country are at a point where they almost have to offer customers an option to ‘Afterpay it’. And signs are looking good for the US and UK markets too. In fact, Afterpay recently announced that it now has more than a million UK-based active users. And that’s after just a year in the market. Things are even better in the US, where Afterpay is enjoying widespread enthusiasm and more than 5 million active customers.

Foolish takeaway

I still think there is at least a little froth in the current Afterpay share price, and I don’t think things are as rosy as the market is assuming for this company. Remember, Afterpay has yet to turn a profit. But if the company continues to grow on its current trajectory, paying $18 billion for the ‘next Visa’ would seem pretty cheap.

I’m not investing in Afterpay at these levels, but in not doing so, I acknowledge that I might be on the wrong side of history here.

More reading

• ASX 200 falls 0.7%, Qantas and Afterpay make a partnership
• 2 ASX shares I would buy for growth and income
• Afterpay share price pushes higher on Qantas partnership
• ASX 200 edges higher: Afterpay and Qantas join forces, big four banks push higher
• These were the 5 best performing ASX shares last week

Sebastian Bowen owns shares of American Express, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Visa. 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. The Motley Fool Australia has recommended Mastercard. 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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