The ASX is off to a positive start to the week today as Miners and Energy stocks were bullish due to the rebound in commodity prices. The ASX 200 gained 0.3% to 7441 points. The liquidity pumped into markets continues to push the rally.
The BNPL sector had its best run yet in 2020. The likes of Afterpay, Zip, Sezzle, etc performed extremely well and the stock prices soared. In 2021, the BNPL sector performance was shaky. BNPL looks to be unloved by the markets despite the companies hardly putting a foot wrong. This opens up an opportunity to consider some of the best BNPL stocks for a relatively cheaper price.
Afterpay is arguably the biggest BNPL stock in the world, and is definitely the biggest here on the ASX. The company has not put a foot wrong, however, the share price is showing weakness in 2021 and it may be a great time to consider APT shares.
Afterpay has been acquired by US FinTech giant Square Inc. During FY21, Afterpay has seen continued global growth during FY21 and strong operating performance achieved across all regions. FY21 Underlying Sales of $21.1 billion, a 90% increase on the prior corresponding period (pcp), with a current run rate of over $24 billion per annum (based on Q4 FY21 trading).
The geographic profile of the Afterpay business continues to evolve, with all regions performing strongly during the period notwithstanding that global retail remains at various points of reopening due to the effects of the Pandemic. In Afterpay’s most established ANZ region, the top 10% of consumers are now using Afterpay more than 60 times per year. International regions continue to follow the ANZ trajectory with both NA and Clearpay recording increases in consumer frequency during the period. ~93% of FY21 Underlying Sales coming from repeat customers.
The new entity under Square will give Afterpay further firepower and we may see Afterpay increasing its revenue streams. The influx of cash is a good sign and given that Afterpay shares still show weakness, we think its a BNPL stock to definitely consider.
Zip is the 2nd largest Australian BNPL company. The company is evolving in this relatively new industry, it has been around for a while. Hence, Z1P was first listed on the ASX in 2009 and is headquartered in Sydney. Zip has around 10,000 retail partners and 1,2 million customers in Australia.
Today, the Zip share price is up by more than 5% to $6.85. This follows the recent announcement of a major investment. According to the release, Zip has agreed to make a strategic US$50 million investment in India-based “Buy Now Pay Later” operator ZestMoney. The Indian BNPL has 11 million registered users, over 10,000 online merchants on the platform, and a point of presence in over 75,000 physical stores.
It is a considerable expansion opportunity for Zip. Thus, a potential massive earnings growth could be expected in the following years.
Z1P share performance in the past was much likely sideways. We think Zip shares offer strong growth and it is a BNPL stock to closely watch.
Latitude is another BNPL stock here on the ASX. Similar to the sector, LFS shares have been subject to a high degree of volatility in recent times. The company is relatively new, having only listed in April 2021. LFS shares have not really had a chance to go on an upward trend given that the BNPL sector has been subject to pressure.
In its half year result ending June 2021, Total volume excluding the significantly COVID-impacted travel and international category grew strongly by 11% on PCP. Strong growth in Lending was seen across both personal and auto loans. Total personal and auto loan volumes up 37% on PCP, including 35% in Australia and 46% in New Zealand. Installations volumes up 3% led by a strong performance in New Zealand, while Australian volumes were driven by continued consumer demand in the home segment and domestic scheme spending, offset by periods of store closures during lockdowns.
LatitudePay (BNPL) customer base grew 73% on PCP to 458,000 open accounts, and ~2,000 new merchant partners activated, with significant new merchant growth in the pipeline. The underperformance of the LFS stock despite strong operational and financial results opens up an opportunity for investors. Latitude is a bnpl stock worth considering.