WAAAX is sooo 2018… or so the ASX would have you believe. Although Australian investors have seemingly just got used to this acronym to rival the US's FAANGs, there might new a new one on the horizon for 2019: ZASF… FZAS (we can work on it).
This, of course, refers to the payment companies that have taken the ASX by storm in 2019. Lead by WAAAX's own AfterPay Touch Group Ltd (ASX: APT), we can also include FlexiGroup Limited (ASX: FXL), Zip Co Ltd (ASX: Z1P) and the new kid on the block – Splitit Ltd (ASX: SPT).
The FZAS stocks are up an average of 128% since New Year's Day (on today's prices) – with the high-flyers Zip and Splitit up 198% and 152% respectively. At its highest point this year, Splitit was up over 426%, for some perspective! By comparison, the WAAAX stocks have (only) reached an average of just over 66% since the start of 2019. So maybe its time for WAAAX to move over!
So which of these payment hopefuls is the best buy in 2019? Let's have a look at how each FZAS stock holds up
AfterPay Touch
AfterPay is definitely the most-well known out of either WAAAX or FZAS. The buy now-pay later company beloved by millennials everywhere is driving investors crazy all over again. As the once-feared Senate inquiry fades into memory and AfterPay prepares to launch in the UK, AfterPay is continuing its conquer-the-world campaign. The pressure for AfterPay remains if it can maintain its 'moat' on the niche it has come to dominate in the face of global behemoths Visa, MasterCard and American Express.
FlexiGroup
Flexigroup has been making waves recently with its humm platform. According to the company, humm has been bolstered by the signup of a few large players in the retail space, including JB Hi-Fi Limited (ASX: JBH) NZ, Ikea and Myer Holdings Ltd (ASX: MYR). humm has reportedly gained a foothold in the buy now-pay later market of around 17%, which is a great start for FlexiGroup's new product. The key to success for these payment platforms is retailer adoption, and Flexigroup has made a good start with these names. For me, the jury is still out whether they can compete with AfterPay in the long-run.
Zip Co
Zip is the 'original' AfterPay rival. Although AfterPay has always had the 'first mover' advantage, Zip has held up in second place very well, with revenue from the March quarter (2019) coming in at $23 million, which was an increase of over 20% year-on-year. I think that the buy now-pay later sector has room for more than one player (as proved by Visa and MasterCard's co-habitation with PayPal and American Express) and Zip Co has proved it has legs, with a 60% year-on-year increase in retailers offering its platform.
Splitit
As mentioned above, Splitit sure did arrive on the ASX with a bang. After only floating in January, IPO investors are still up big. However, I feel like Splitit is the most speculative of the payment stocks. It offers a different spin on the buy now-pay later model, offering longer (and interest-free) payback times up to 36 months, multi-card payments and a money-back guarantee if you don't like what you've bought. Splitit posted a loss of over US$2.5 million, with revenues of about US$320,000, which is not entirely encouraging, considering the success of AfterPay in particular. At current prices, I will definitely be sitting on the sidelines for a while on this one.
Foolish Takeaway
I think all of these FZAS stocks have the potential to make it in the payments game. However, with the US giants' dominance of this sector and competition only increasing, all have a high level of risk (particularly at current prices). Investors will need to decide who has the best moat and if it's wide enough to keep the competition out of the castle.
