Buy Now Pay later to Sell Now Buy Later Journey – APT, Z1P, FXL and SPT

It’s in common knowledge that the Australian share market has been under immense pressure after the coronavirus pandemic began to weigh down on the nation’s economy, shaking consumers and investors confidence. Since Australia recorded its first coronavirus case on 25^th January 2020, the S&P/ASX 200 index has plunged drastically by over 30 per cent (up till 19^th March 2020).

But are you aware that the Buy Now Pay Later (BNPL) space has been amongst the hardest hit sectors amidst huge sell-off in the share market?

Wear your seat belts tight as we are going to familiarize you with some of the Australia’s well-known BNPL players, whose stocks have plummeted sharply with the escalation of COVID-19 spread in Australia.

To begin with, let’s have a look at the horrifying returns of the BNPL stocks trading on the ASX in the last one month:

Afterpay in Strong Position to Deal with COVID-19, Believes MD Anthony Eisen

Australia’s renowned BNPL company, Afterpay Limited (ASX:APT), whose stock delivered a return of about 26 per cent just in January 2020, is now trading in red territory for the last few days. In fact, the stock has produced a negative return of ~57 per cent in the last five trading days, closing the session with a fall of 22.4 per cent on 19^th March 2020.

Though the impact of COVID-19 on the stock is quite evident, the Company is confident of its balance sheet, business model and customer case that creates a level of protection during periods of economic uncertainty.

In its latest letter to shareholders, Afterpay’s CEO and Managing Director, Mr Anthony Eisen notified that the Company has risk mitigation capability and a dynamic system and is implementing measures proactively to deal with the coronavirus. He shared the following key strengths of the Company that validate its considerable potential:

• Its service promotes budgeting by responsible customers.
• Its average outstanding balances and average transaction values are low with no material concentration from a customer or merchant in its portfolio.
• Its operating model and product design have been built in risk mitigations.
• It can manage losses in real time due to the dynamic nature of the Company’s system and the short duration of its receivables book.
• The average age of its customers is 33 years globally.
• Its liquidity position and strong balance sheet provide it with the capacity to considerably expand its business activities in the medium term and continue to fund its operating expenditure.

It is imperative to note that though APT seems to be in trouble, it has managed to deliver substantial returns prior to the coronavirus outbreak. The stock has produced a return of over 140 per cent in 2019.

Zip Generated $30 million Revenue in Jan-Feb 2020 Despite Market Volatility

The share price of fintech player, Zip Co Limited (ASX:Z1P) fell by another 11 per cent on 19^th March 2020, closing the trading session at $1.175. The Company’s share price tumbled largely due to volatile market conditions in response to coronavirus pandemic.

However, the Company informed in its recent ASX update that its business continues to perform strongly, with vigorous transaction volume, customer growth and a robust pipeline of enterprise partners in advanced discussions or in integration.

As per the update, the Company produced $30 million in revenue over Jan-Feb 2020, that was 98 per cent higher than the prior corresponding period. Moreover, the Company reported quarter-to date core transaction volume of $403 million, 85 per cent up year-on-year.

The Company is of the opinion that though there will be softening of demand across some segments like travel and tourism, discretionary spend categories and bricks and mortar retail, the demand for everyday spend and health, bill payments and online purchases will continue to remain strong.

Furthermore, the Company’s financial position strengthened after its recent $62 million equity placement held in December 2019.

FlexiGroup Share in Surprise Downgrade

From share price of $1.850 on the day it announced the launch of its BNPL product bundll, the stock of FlexiGroup Limited (ASX:FXL) has declined to $0.595 on 19^th March 2020, marking a fall of about 68 per cent.

flexigroup launched its first “Buy Everywhere Pay Later” product in February 2020, which represented an entirely new category in the BNPL sector, wherein transactions are not limited by merchant integration. Considered as the next advancement in consumer finance, bundll can be used everywhere.

The product facilitates multiple payments of up to $1,000 at any vendor that accepts Mastercard transactions, assisting customers in their daily spending. Moreover, consumers receive no less than two weeks to pay bundll or can utilise an accrued ‘snooze’ to postpone payment further.

The Company’s BNPL service does not charge merchants or consumers, while it relies on interchange fee from Mastercard to fund interest-free period of two weeks.

No wonder, with the entry of such BNPL players in the fintech space, Australians have started switching top their services, turning away from credit card payments and cash.

Splitit Announced No Material Impact from Coronavirus Pandemic

Though Splitit Payments Ltd’s (ASX:SPT) share price has continued to remain in red territory for the last few days, the Company has recently declared no material impact from COVID-19. The Company’s share price plunged by ~12.7 per cent on 19^th March 2020, closing the session at $0.240.

The Company recently mentioned that though coronavirus is expected to result in softer consumer spending across the world, it continues to observe strong growth in new partnerships and merchants. Moreover, it believes it is well positioned with an external factoring facility in place and $16.3 million in cash as at 31 December 2019.

The Company reported that it can effectively manage variations in working requirements in response to coronavirus pandemic to curb any disruption to its operations.

Splitit’s CEO and Managing Director, Mr Brad Paterson mentioned that the Company has implemented several actions including suspending all travel along with business continuity plans, recommending work from home to ensure product development and all customer support operations are not affected.

In a nutshell, though these BNPL players have been undergoing sharp share price falls amidst coronavirus market correction, they are ideally positioned to emerge as potential leaders in their respective fields once the conditions stabilize.

Disclaimer

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