After a hot 2020, the BNPL sector has taken a breather of late. With market leader Afterpay taking a serious share price beating in the past month.
But, despite the market moves, it hasn’t put a dampener on management’s outlook. With Openpay Group Ltd [ASX:OPY] proving that point today.
The up-start competitor announced a new foray into healthcare this morning. With a focus on both US and UK markets. Albeit, primarily focused on pets rather than people, for now.
News that saw Openpay shares surge at the beginning of trade today, only to retrace by midday.
At time of writing, shares in the stock are down 2.23%, locking in a volatile trading session as almost all BNPL stocks traded lower.
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So, has BNPL lost its shine, or is this a buying opportunity for stocks like Openpay?
Success breeds competition
First up, let’s talk a little about Openpay’s new agreement. Because while it hasn’t necessarily received the reception management was no doubt hoping for, it is still important.
As they note in their announcement, Openpay has teamed up with ezyVet. A cloud-based platform that manages and helps grow veterinary-based businesses. And now, Openpay will become an integral part of their professional services offering.
With 2,000 practices under their belt, it will open up plenty of commercial opportunities. Especially as US and UK markets are far larger than Australia alone.
No doubt management will be hoping this is just the first of many deals to come, too. Their first step into the much bigger and broader healthcare sector.
As Openpay CEO Michael Eidel notes:
‘We’re delighted to be taking the successful model and trusted partnership with ezyVet to our US and UK operations. This is an important milestone for us — it signifies our first significant US partnership and our entry into the UK healthcare vertical.’
For these reasons, investors should have good reason to be optimistic.
However, it is clearly not the only development weighing on shareholders’ minds…
The much bigger story for the entire BNPL is sector is of course CommBank. With this juggernaut of traditional finance set to develop and market its own BNPL service.
Whether it will be a successful venture is, of course, yet to be seen. And while I have my doubts, this threat of competition can’t be underestimated.
Especially when the possibility for further regulation around BNPL is still looming. A scenario that could see many of these smaller operators — like Openpay — have to devote more resources to ensuring they are compliant.
It’s all very much up in the air, with starkly different conclusions all a possibility.
Therefore investors need to be extra diligent with their decision-making at a time like this. With the very real potential for BNPL stocks to sink or soar from here on out.
Where to next for Openpay shares?
Personally, I wouldn’t be surprised to see another leg down for the entire BNPL sector from here.
Like I said at the start, it was running extremely hot for much of 2020. It is hard to argue against the fact that many of these stocks are in bubble territory. Which is why another pullback certainly seems possible.
However, I also wouldn’t put much conviction in CommBank upending the market either.
They certainly have the capital and the manpower to make a BNPL service, but that doesn’t guarantee its success. I suspect that a stuffy old bank brand will have a hard time converting the core, youthful demographic of BNPL users.
After all, the banks have tried for years to win over younger generations with little success. I’d be surprised if this latest bandwagoning on a trend actually works.
That’s why we’d suggest looking elsewhere, to fintech stocks brimming with potential.
In fact, we’ve put together an entire report on the topic. Including three of our favourite new picks to shine in the next stage of the fintech boom.
For all the details, check out the full report, right here.
Regards,
Ryan Clarkson-Ledward
For Money Morning
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