Is the BNPL Space still too expensive?

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

Ask a question

The Latest Q&A

Question asked 25/06/2022

Is the BNPL Space still too expensive?

Hi James, Love the website update and the way that MM is continually improving. My question concerns the BNPL space. I have not been in this space for the past couple of years as the share prices made no sense to me, despite the MM webinars and the Shaw recommendations. The only way that I could justify the valuations was if BNPL would replace credit cards - unlikely that Visa, Mastercard or the banks would allow that. Also there would have had to be no bad debts. My question being is the BNPL space just hot air that has passed, or is their genuine merit in the sector? Just for fun what is your view on ZIP, is it now just a trading speccy Kind Regards Jonathan

Answer

Hi Johnathan,

You’re right, we’ve got the BNPL space wrong, our only real consolation being that we cut our position in Zip in the Growth portfolio around $6 at the same time reducing it in the Emerging Companies portfolio. Two points:

The level of competition shows the space is real. i.e. everyone in payments is now offering a BNPL soluti0n which proves validation.
That level of competition makes it harder on all fronts to grow, and now the burden of rising rates kicks in.

At this stage, we believe there will be some good trading opportunities in Z1p and the broader sector, and if bad debts happen to subside then relief could be more lasting, however we now have doubts about the long term economics of BNPL when there have simply been so many players now enter the space. Trade rather than invest the message. As an aside, the one analyst that has got the sector totally right is Tom Beadle from UBS, who still has a sell.

Latest Reports

Weekend report 20/04/2024

Weekend Q&A: Volatility spiked on Friday after Israel launches strikes on Iran

The ASX200 endured a week to remember, closing down -2.8% on concerns that interest rates will remain “higher for longer” and increasing concerns that the Middle East tensions will deteriorate further after Israel retaliated against Iran following last week's drone attack. It's hard to imagine an amicable conclusion to the current problems in the Middle East, but we all hope it doesn't become another painful, prolonged affair like the Ukraine–Russia war, which has now entered its 26th month.

Afternoon report 19/04/2024

The Match Out: Middle East tensions see risk off for equities

Shares tracked pre-market futures lower early in our session before headlines of a further escalation in the Middle Eastern conflict caused another wave of selling took the market to 2 month lows. Energy found support with oil cracking $US90/bbl again which was also a concern for those positioned for inflation to roll off. Until midday, traders had no interest in taking risk in today’s session but the afternoon painted a different picture. The ASX closed well off the intraday lows with many sectors rallying more than 0.5% between midday and the end of trade. Despite the Friday afternoon fight, the local market had its worst week since September, falling -220pts / -2.83%.