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Will BNPL shares continue to rally?
The COVID-19 pandemic has seen a change in customers’ approaches to online retail, creating a tailwind for the “buy now, pay later” sector.
Will BNPL shares continue to rally?
The COVID-19 pandemic has seen a change in customers’ approaches to online retail, creating a tailwind for the “buy now, pay later” sector.
In a conversation with nestegg, Tribeca lead portfolio manager Jun Bei Liu explained why she believes the buy now, pay later (BNPL) sector could continue to outperform.
“They have certainly demonstrated incredible earnings momentum across their business in the past six months. Not many companies and sectors have gone through 100+ per cent growth in the global pandemic-affected FY20,” Ms Bei Liu said.
“Companies in this sector have all demonstrated strong growth, a clear indication that the product is gaining traction globally.”
Afterpay
Afterpay has seen its full-year losses more than halve as it doubles the number of customers, it told the ASX.
Despite heavily expanding into new areas, including Europe, the BNPL giant has seen its annual net loss halved to $19.8 million.
The company’s underlying sales revenue grew to $11.1 billion, which is more than 100 per cent year-on-year growth.
Active customers until 30 June grew to 9.9 million more than double the 4.6 million in the year prior.
Zip
Total revenue for the buy now, pay later provider increased by 91 per cent on the prior year to $161.0 million. Adjusted total revenue grew by 79 per cent.
Transaction volumes generated by consumers increased by 91 per cent during the financial year to $2.1 billion. Loan book (receivables) for Zip increased by 73 per cent to $1,182.0 million.
Zip reached the 2 million customer milestone during the fourth quarter. Active customer accounts are now up by 62 per cent on the prior year.
Humm (FlexiGroup)
Following a rebranding to Humm, the group recorded strong growth this reporting season.
Humm increased its customer base by 37 per cent to 2.1 million customers, up from 1.5 million in the 2019 financial year, saw a 172 per cent increase in online sales, and increased its transaction volume by 18 per cent to $2.1 billion.
Could the sector continue to grow?
Despite already experiencing rapid growth, investors who have missed out on the initial run are being advised that it might not be too late to get in.
“As long-term investors of those businesses, we believe the share price will continue to track higher. But given the strong rally, investors can afford to be tactical with the current market volatility. Be sure to be brave to step in when others are fearful,” Ms Bei Liu concluded.
nestegg has previously explained how investors can get ahead by purchasing Afterpay and Zip shares on a Tuesday and selling on a Friday.
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