* Afterpay shares close up 6.8%
* Sees fiscal 2020 transaction margin of 2.25%
* To report full-year results on Aug 27 (Writes through, adding fund manager comment and forecast details)
Aug 20 (Reuters) - Afterpay Ltd shares rose nearly 7% to a record on Thursday after the buy-now-pay-later (BNPL) firm nearly doubled its annual core earnings forecast, putting it among Australia’s 20 most valuable companies.
Its shares have shot up nine-fold from a March-low, closing the day at around A$80 with a market value of more than $16 billion.
Alternative credit firms such as Afterpay, which offer small instalment loans to shoppers and make money by charging merchants a commission, are riding the boom in online shopping that has been sparked by the coronavirus pandemic.
Supported by smaller-than-expected losses on customer transactions, Afterpay expects underlying core earnings of A$44 million ($31.6 million) for the full year, up from its prior guidance range of A$20 million to A$25 million, it said in an after-market announcement on Wednesday.
Afterpay, which is Australia’s biggest BNPL company and the world’s most valuable in the sector, reports earnings next Thursday.
“As long as it can keep up with its growth and the end-market is enormous, I think the share price could well reach within A$100,” said Jun Bei Liu, a fund manager at Tribeca Investment Partners, who owns shares in Afterpay.
Much of the surge in popularity of BNPLs has been driven by state aid, and analysts had worried about what would happen once stimulus winds down.
Concerns about valuations, however, remain for a company still making losses and with a price-to-sales ratio, an indicator of value for each dollar of sales, of around 44.
Melbourne-based Afterpay also said its full-year transaction margin - a key measure of profitability - is expected to be 2.25%, higher than forecast in July.
Tribeca’s Liu said most analysts have not updated their forecasts yet, and after next Thursday’s results she expects “significant earnings upgrades, something like 50-60% for the next couple of years just on that margin assumption.”
A regulatory filing late on Wednesday showed Japan’s largest lender by assets Mitsubishi UFJ Financial Group Inc had acquired about 5% of Afterpay, months after Chinese gaming and social media giant Tencent Holdings Ltd bought a 5% stake. ($1 = 1.3941 Australian dollars)
Reporting by Nikhil Kurian Nainan and Shashwat Awasthi in Bengaluru; Editing by Christopher Cushing and Muralikumar Anantharaman
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