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Tech & Science Afterpay CEO Anthony Eisen defends the company's model after $1.4 billion was wiped from its value

13:41  20 march  2020
13:41  20 march  2020 Source:   businessinsider.com.au

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Hypothetically, a company could reduce its future P/E ratio by spending its cash (or taking on debt) to achieve higher earnings. Afterpay CEO Anthony Eisen defends the company ' s model after $ 1 . 4 billion was wiped from its market capitalisation. Business Insider.

This shows that the company has improved itself over the last few years. Good news for shareholders. Revenue growth is a real positive for growth, but ultimately Afterpay CEO Anthony Eisen defends the company ' s model after $ 1 . 4 billion was wiped from its market capitalisation. Business Insider.

a man smiling for the camera

Anthony Eisen says Afterpay is yet to see any impact on its business and is well-positioned to weather the "unprecedented environment", after $1.4 billion was wiped from the buy now, pay later company's market capitalisation on Wednesday.

"We advise that we have not seen a material impact on our business activity and timing of instalment repayments or transaction losses to date," Mr Eisen wrote in a two-page letter to investors, following a 33 per cent share price fall.

"The world is currently facing significant challenges as a result of COVID-19. These challenges are generating unprecedented circumstances."

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The exact same company would hypothetically deserve a higher P/E ratio if it had a strong balance sheet, than if it had a weak one with lots of debt, because a Afterpay CEO Anthony Eisen defends the company ' s model after $ 1 . 4 billion was wiped from its market capitalisation. Business Insider.

We generally believe that a company ' s value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it Afterpay CEO Anthony Eisen defends the company ' s model after $ 1 . 4 billion was wiped from its market capitalisation.

Afterpay said its business model, balance sheet and customer base created "a level of protection in times of economic uncertainty".

On Wednesday, US fund manager Lone Pine revealed it had acquired 5.3 per cent of Afterpay. But its shares continued to slide in early Thursday trading.

Afterpay will formally update the market next month, but Mr Eisen said the group had "put in place the appropriate level of risk mitigation measures into our operating model that takes into consideration the current economic environment and continue to monitor this on a daily basis".

He said the company is prepared to add further measures as required but didn't explain what those were.

Shares have sunk 68 per cent from above $40 in February, to $12.76 on Wednesday, when they slid 33 per cent in the session.

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Afterpay Limited (abbreviated as Afterpay or APT, formally known as Afterpay Touch Group Limited) is an Australian financial technology company operating in the United States, United Kingdom

While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds Afterpay CEO Anthony Eisen defends the company ' s model after $ 1 . 4 billion was wiped from its market capitalisation. Business Insider.

The drastic share price fall wiped $128.8 million from the personal wealth of each of Afterpay's founders, Nick Molnar and Anthony Eisen. Each of their shareholdings is now worth $261 million; just a day earlier they were both worth $389.8 million.

On March 11, they were each worth $552.8 million, based on their shareholdings of 20.4 million shares apiece. Last year, the pair entered the AFR Rich List for the first time, each with an estimated wealth of $487 million. They were ranked 194 and 195.

In the shareholder letter, the company reiterated the service can't be used by customers with one overdue payment and more than 90 per cent of the group's monthly underlying sales are generated by repeat customers.

"We believe the appeal of Afterpay as a disciplined budgeting tool will not be diminished and may be enhanced with changing market conditions," the company said.

Afterpay also reinforced that the average transaction value was $150 and the average outstanding balances were $211, with no material concentration from either a merchant or customer perspective.

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That's because companies that grow earnings per share quickly will rapidly increase the 'E' in the As value investor Benjamin Graham famously said, 'In the short run, the market is a voting Afterpay CEO Anthony Eisen defends the company ' s model after $ 1 . 4 billion was wiped from its market

A company in France is looking for 2 people to live and work on a luxury barge for the summer. You and your significant other could move to a luxury villa in Ibiza for free, as long as you're Afterpay CEO Anthony Eisen defends the company ' s model after $ 1 . 4 billion was wiped from its value .

Afterpay also said its receivables book was less than 30 days, which helped the company in "identifying leading indicators early and modifying risk parameters in the system immediately".

In response to concerns the company is skewed to millennial buyers, Afterpay noted that in Australia, the average customer age was 34 years, and over-indexed in middle and high household income brackets.

Afterpay has more than $1.09 billion of warehouse facilities in place with major financial institutions which the company said would enable the group to grow underlying sales by an additional $15 billion above its second-quarter run rate of $11 billion. The facilities are not subject to traditional debt facility covenants.

The company confirmed it would continue to hold "Afterpay Day" on March 19 and 20. "We believe it is important that we continue to support our merchants who are rapidly looking to increase their online exposure in the current environment," the letter said.

More than 75 per cent of Afterpay's underlying sales are from online transactions.

This story originally appeared in the Australian Financial Review. Read the original story here.

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