Insights

Can ASX BNPL companies like Afterpay (ASX:APT) compete with Paypal?

The share prices of ASX BNPL companies have been dropping following news Paypal will launch its own BNPL product in Australia this year.
The post Can ASX BNPL companies like Afterpay (ASX:APT) compete with Paypal? appeared first on The Motley Fool Australia. –

Battle between ASX shares represented by 2 investors facing off short sellers

Shares in buy now, pay later (BNPL) companies like Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) all soared to new all-time highs over the last year.

Afterpay, in particular, has grown from a media darling into a bona fide ASX behemoth. With a current market capitalisation of almost $32 billion, it is larger than both BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA).

From a low of just $8.01 twelve months ago, the Afterpay share price skyrocketed to $160 by February – a whopping gain of close to 1900%. Zip’s gains were almost as impressive, surging almost 1300% from a low of $1.05 in March 2020 to a new 52-week high of $14.53 by February. 

But the wind has gone out of their sails more recently. Volatility has returned to global markets as investors try to price in the continued impacts of the COVID-19 pandemic, and technology growth stocks have been hit particularly hard. There was also the recent announcement that US payments company Paypal Holdings Inc (NASDAQ: PYPL) is set to launch its own BNPL offering in Australia in June, in direct competition with both Afterpay and Zip.

Recent corrections

The Afterpay share price has plummeted over the last few weeks. Since hitting an all-time high price of $160.05 in early February, Afterpay shares have dropped almost 30% to $113.42. Zip shares have fared even worse, plunging 40% from their high of $14.53 to $8.59.

Sezzle Inc. (ASX: SZL), a US-based BNPL company, has also seen its share price plummet 30% from its February high price of $11.99 to $8.00. This might indicate that the drop in share price of both Afterpay and Zip is more to do with a general tech sector correction than concerns around Paypal’s Australia launch. Paypal’s BNPL service has been up and running in the US since last year.  

Recent financial performance of ASX BNPL companies

Afterpay released its first-half FY21 results to the market last month. In it, the company reported that $9.8 billion in sales had been processed through its platform during the six months ending 31 December 2020, an uplift of over 100% versus the first half of FY20.

Total income was up 89% year on year to $417.2 million, while earnings before interest, tax, depreciation and amortisation expenses (EBITDA), excluding foreign currency gains and losses, came in at $47.9 million, a jump of 521%.

Zip also released its first-half FY21 results last month. It was a record half for the company, with transaction volumes soaring 141% year on year to a little over $2.3 billion and total revenues up 130% to $160 million.

Zip also announced it was accelerating its US expansion plans after completing the acquisition of US-based BNPL provider Quadpay in the US in August 2020.   

Outlook for ASX BNPL companies

It is difficult to assess how much of an impact Paypal’s BNPL offering will have on the fortunes of both Afterpay and Zip.

Undoubtedly it will cause some disruption – Paypal’s offering is as cheap (if not cheaper) for consumers, and it is fully integrated into the company’s existing payment platform. This means it will roll out relatively seamlessly to all of Paypal’s 9 million Australian customer accounts.

However, it is worth remembering that both Afterpay and Zip are expanding into new international markets. North America and the United Kingdom were Afterpay’s fastest-growing segments in terms of underlying sales, active customers and active merchants for the first half of FY21. In fact, North America accounted for 43% of Afterpay’s underlying sales for the first half FY21.

This geographic diversification means it is less exposed to the threats posed by Paypal. It also shows that Afterpay has so far seen little negative impact on its US growth trajectory from Paypal’s BNPL product in the American market. Only time will tell if it can also shrug off the challenge in the domestic market.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Rhys Brock owns shares of AFTERPAY T FPO, ZIPCOLTD FPO, Sezzle Inc, Commonwealth Bank of Australia and PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings and Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Can ASX BNPL companies like Afterpay (ASX:APT) compete with Paypal? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!