Brokers praise Afterpay raising as target prices are lifted – The Australian Financial Review

Afterpay has earmarked Canadian expansion in the coming quarter but Mr Sotiriou said the European Union was the “next obvious expansion point, otherwise somewhere closer to home in the south-east Asian region.”
He said further merchant volume growth would be driven by its expansion into Canada, a move into in-store purchases in the United States and an increase in volumes via eBay and Ticketek.
“The balance sheet is also significantly de-risked with APT, post-capital raising, having as much cash as its receivables book,” Mr Sotiriou said.
Morgans analysts Richard Coles and Steven Sassine described the share issue as an “opportunistic raising following a strong share price run”.
Afterpay last reported that it had $541 million of cash but noted the new funds “further de-risks the balance sheet” as its cash coffers were bolstered to $1.1 billion, while the capital provides funds for further growth.
Mr Coles and Mr Sassine said the $250 million sell-down by co-founders Nick Molnar and Anthony Eisen comes with “the usual negative connotations” and a short five-month commitment not to sell further stock.
But they said that parcel represented only 10 per cent of their holdings, with both founders retaining 18.4 million shares each.
The brokers lifted its price target from $45.96 to $68.58.
One area of focus has been loss rates. Afterpay informed the market that loss rates improved in the second half of the year to 55 basis points, better than most analyst forecasts.
Macquarie analysts said “COVID and government support initiatives were unusual factors that have impacted the second half, so the underlying trend isnt 100 per cent clear”.
Morgan Stanley analysts led by Andrei Stadnik have a price target of $36, well below the current share price.
They said the “impressive” June quarter update already reflected the good news as the stock rerated from 12 times next year’s revenues in February, to 25 times.

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