Forget iron ore which is flying high right now, there are many more undervalued stocks that you can still take a punt on.
We love our tech punts and today we are pitting the banks against the technology plays.
Have you heard of AFTERPAY and ZIP? Has bank stocks like NAB and BOQ WBC been on your radar. Today with the market down apart from iron ore stocks that have already risen quite a bit, there are bank stock which have been hammered lately and some tech stocks that can still be of some value.
Let’s have a look at them
Afterpay vs Bank of Queensland
Afterpay – https://www.afterpay.com/
Afterpay was founded in June 2015, so its not a very old stock, however the price for it had gained traction very fast in these last couple of years. Afterpay and Touchcorp merged in June 2017 to form Afterpay Touch Group. Since the merger, Afterpay Touch Group has emerged as a leader in the “buy now pay later” industry. They are listed in the Financial technology category. It’s got a revenue of $AU 113.9 million in (2018)
As you can see from the above chart the price for APT(afterpay) from June 2017 ASX launch to Dec 2017 was a quite steady rise from $2.95 to $5.97 then
DEC 2017 to AUG 2018 steep rise from $5.97 to $19.69
AUG 2018 to NOV 2018 a drop from $19.69 to $11.29
NOV 2018 to APR 2019 a steep rise from $11.29 to $25.30
Afterpay launched in the US in mid-May 2018 with retailers such as Urban Outfitters. We can compare their Australian launch to price rise in the first year to the recent launch in the US markets and see there has been a substantial price rise since launch into the US and UK [In August 2018, Afterpay entered into a share purchase agreement to purchase Clearpay, a UK based buy now pay later subsidiary of Thinksmart]
So has the US and UK launch been already priced in? The future share price of afterpay will surely depend on how they fare in these two markets in the coming months. NAB is major lender to Afterpay apart from CITI.
The Bank of Queensland is an Australian retail bank with headquarters in Brisbane, Queensland. The bank is one of the oldest financial institutions in Queensland and has 252 branches throughout Australia, including 78 corporate branches and 166 “owner managed” branches.
Bank of Queensland Limited (ASX: BOQ) Analysts at Goldman Sachs have retained their sell rating and $9.09 price target on this regional bank’s shares following the release of its half year results.
BOQ price in the last 5 years chart shows reaching just above $14 with current price at $8.70
While analysts say sell, there could be opportunity for people who see it as the bottom right now.
Here is their latest distribution statement – https://www.asx.com.au/asxpdf/20190417/pdf/444cp1px8bt834.pdf and here is their price history https://au.finance.yahoo.com/quote/BOQ.AX/history/
More about Afterpay
When the afterpay IPO was listed, A total of 25 million new shares at $1.00 each were issued to new shareholders to raise $25 million in equity.
The company facilitates commerce between retail merchants and their end-customers by offering a “buy now, pay later” service that does not require end-customers to enter into a traditional loan or pay any upfront fees or interest. In it early launch it had 60,000 users, today it has 3.1 million (2019).
For the six-month ending December 31 2019, the U.S business only contributed 13% of underlying merchant sales, so we can see the market is already pricing in more success for the group in the US, which looks reasonable given its strong start in the region.
Afterpay has a number of competitors including Zippay, Klarna, Splitit and Sezzle. It is worth noting that in Australia ZIP pay is a good competitor and market share can be taken by simply offering to charge merchants lower fees on every sale
ZIP PAY – https://account.zipmoney.com.au/#/
How does zip work?
Here is what their website says!
- Own it now with nothing to pay
- Pay back over time, interest free
- Use your account online or in-store
ZIP and Afterpay revenue models
That is pretty much the company revenue model, you don’t pay back on time they make money on interest charged. They also can get paid revenue from retailers for getting them customers who could not afford to buy right away.
Earlier this week Zip Co announced that its SPP closed significantly oversubscribed following a strong shareholder response and the decision of Westpac Banking Corp (ASX: WBC) to exercise its top-up rights in full.
The SPP allowed eligible shareholders the opportunity to subscribe for up to $15,000 worth of new shares at the discounted price of $1.53.
STOCK PRICES TODAY [ASX]
Afterpay Touch Group Ltd
Zip Co Ltd
Bank of Queensland Limited
National Australia Bank Ltd.
NAB [ National Australia Bank]
National Australia Bank is one of the four largest financial institutions in Australia in terms of market capitalisation, earnings and customers.
In recent times though, the royal banking commission saw the loss of its chief executive and chairman and adding to their list of recent price dips.
The big bounce in banking sector over the past few days is certainly adding to optimism that we may have seen the worst of the bank stock sell-off with the Commonwealth Bank of Australia (ASX: CBA) share price, Westpac Banking Corp (ASX: WBC) share price, Australia and New Zealand Banking Group (ASX: ANZ) share price and National Australia Bank Ltd.
With our current tech stocks plays, it’s good to note that NAB is a lender to Afterpay and also recently – realestate.com.au announced that it is building on its expansion into financial services by signing a new strategic mortgage broking partnership with NAB.REA :ASX is another good tech play that is worth keeping on your watch/buy list.
Have you had a punt on any of these stocks? Do let us know what you think by contacting us or in comments below.
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