It’s been a rough 12 months for Openpay Group Ltd [ASX:OPY].
The OPY Share Price is down 70% from its all-time high of $4.70 at this time last year. A peak that would quickly give way to a long-running downtrend for this aspiring ‘buy now, pay later’ (BNPL) stock.
Unfortunately, with the release of their annual report today, Openpay has failed to snap this losing streak. With the share price falling 4.44% in today’s trading.
So, what’s gone wrong for this tiny fintech company?
Strong growth, but not strong enough
Now, let me start off by saying that Openpay’s results certainly aren’t bad.
If they were operating in any other sector but BNPL, they’d probably be enjoying far more jubilation from the market. But that simply isn’t the case…
Openpay’s revenue for FY21 increased by just under 50% to $34.2 million. Not a bad result, but certainly not the most impressive either.
However, it is their other key metrics that management was clearly hoping would impress investors.
Active customers increased by 69% to 541,000. Active merchants, similarly, increased by 77% to 3,800. A record-breaking increase for this up-and-coming fintech.
And on top of this, total transaction value rose to $339 million. A 77% increase compared to this time last year. All of which paints a pretty promising picture for this small-cap.
But, I suspect that the reason for today’s negative reception is due to comparisons with the competition. Because when you look at Openpay’s results next to some of the bigger names in the BNPL space, it isn’t that flash.
For some context, let’s take a look at Zip Co Ltd’s [ASX:Z1P] recent FY21 metrics:
- Revenue of $403.2 million, up 150%
- $5.8 billion in total transaction volumes, up 176%
- 3 million active customers, up 248%
- 51,300 active merchants, up 109%
As you can see, in terms of percentile growth, Zip has Openpay beat in every key metric. And they’ve done so from a much larger starting position. Showcasing the power of their platform to scale in international markets.
For these reasons, I believe investors are judging Openpay quite harshly. But that is also just the nature of the market.
If Openpay truly wants to compete, it will need to start showcasing that it can carve out a bigger market share. Something that will only be made possible with the kind of exponential growth that its competition has tapped into.
What’s next for the Openpay Share Price?
The good news is, looking to the future, Openpay has a plan to seize said growth.
As CEO Michael Eidel comments:
‘To accelerate growth as we move into FY22, Openpay continues to establish partnerships with major ecosystem providers and aggregators in our target verticals. These drive seamless integration with new merchants and customers at scale, for our longer, larger and more customised plans. Importantly, we have secured another major contract win for our OpyPro SaaS platform in B2B in Australia, with global IT giant HP, and we see strong demand in other geographies for the upcoming period.
‘These strategies will underpin high margin TTV growth across Openpay’s key verticals, where we will not be trapped into the dynamics of an increasingly overcrowded “pay-in-4” space with strong margin decline and heightened regulatory scrutiny.’
So, at the very least, management is exploring new opportunities. And, perhaps more importantly, it is looking to carve out its own niche in this oversaturated sector with unique offerings.
The HP deal in particular could be a big catalyst for this stock.
And this kind of disruptive opportunity is exactly what good small-caps can provide. Utilising new innovations, technology, or products to up-end competitors. Something that we know all too well.
In fact, if you’re looking for these kinds of small-cap disruptors, then we’ve got the perfect report for you. Because we’ve put together a collection of seven incredible small-cap stocks ripe with potential. And trust me when I say, you won’t want to let them pass you by.
After all, it wasn’t too long ago that Zip was a small-cap itself. Look how far it has come in a short timespan, because that is what small-caps can potentially offer.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
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