Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
The BNPL industry had an incredible come up in 2019, with Afterpay dominating the market and ZIP Co heating up the competition. The BNPL industry has seen significant growth as more Australian consumers turn to BNPL companies as an interest-free way of consuming goods. The industry it’s self, is an exciting prospect for investors as it is still in it’s growth phase. However, picking the right stock can be quite tricky so let’s breakdown a few competitors.
ZIP Co looking at a strong 2020?
Since my last update, ZIP was priced at $3.58 and was coming off the back of a market correction and UBS releasing a SELL note. Now Z1P is priced $4.32 which is a 21% growth in the space of roughly 2 months. Z1P dipped as low as $3.18 in January allowing for a nice entry point for long term investors. Coming off the back of strong quarterly results, Z1P seems to have some good support from investors. With a growing Industry, Z1P may have everything in place now for strong 2020 growth. The two variables that will effect their share price are their competitors – AfterPay and Klarna.
AfterPay sets for the lead in 2020
AfterPay has been the leader in the Australian BNPL industry, however the stock didn’t really surge until January 2019. Since YIG’s last update on Afterpay – the stock has risen 19% to $39.20. We added that brokers such as Morgan Stanley predicted that Afterpay is set to hit $44 by 2020, which now seems very likely. In January, Afterpay and it’s competitor ZIP Co agreed to new regulations on the BNPL industry, making their operations more sustainable and ethical. There is concerns that it may be too late to invest in Afterpay as the company begins to mature in it’s industry. Before investing in anything let alone an industry such as BNPL, it is essential to understand what you believe is a good entry price for the stock. There is still obviously growth in the industry as it is so new, however understanding and researching the industry is essential.
Klarna shocks the BNPL industry
CBA has doubled down on their initial investment in Klarna as they now have $300 million USD stake in Klarna. This news has not effected ZIP or APT share prices as much as predicted however Klarna aims to change the game in a big way. Klarna have notioned that they may scrap late payment fees all together; something that will differentiate themselves from all Australian competitors. The application will be available through CBA’s shopping feature – which is the first time a “Big Four” bank has invested serious interest in the industry. CBA have added they want to improve the complete experience of using BNPL – hoping to take on Afterpay.
It will be an interesting year for the Australian BNPL industry as Z1P, APT and Klarna strategise ways to remain afloat in the dynamic industry.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Tyger Fitzpatrick, founder of YIG.