Afterpay Ltd (ASX: APT) shares have been on fire once again in 2019.
The Aussie buy now, pay later (BNPL) group is up 139.83% this year to be one of the top performers on the ASX 200. While you'd think it rules the roost in the BNPL sector, that may be changing.
Not to be outdone, Zip Co Ltd (ASX: Z1P) shares are also rocketing higher. The Zip share price is up a whopping 224.55% since the start of the year. Zip shares started at $1.10 per share and are now trading at $3.57. What's even more incredible is that they reached a 52-week high of $5.86 back in mid-October.
So, can anyone challenge these 2 ASX growth companies or will their share prices double again in 2020?
Why Afterpay and Zip shares can keep surging higher
Despite the relative infancy of the BNPL sector, Afterpay and Zip have remained ahead of the pack.
The 2 groups are in competition and are constantly fighting for greater market share.
Zip recently inked a new deal with Amazon's Australian arm to be a payment option on amazon.com.au while both companies are pursuing international expansion.
Afterpay has enjoyed a successful foray into the lucrative United States market while its United Kingdom operations have started strongly. It's been a similar story for Zip's ZipMoney service which is starting to gain some serious customers.
It's more than a two-horse race though with recently listed competitor OpenPay Group Ltd (ASX: OPY) also entering the United Kingdom.
Afterpay and Zip shares have been climbing higher on strong customer acquisition and retention this year. Given they are the incumbents in the market here in Australia, I think 2020 could be another strong year.
What could stop them in 2020?
The biggest concern for me would be the slowdown in Aussie retail. That could be a good or bad thing for BNPL providers like these 2 groups.
There's the potential retail sales are down as more people turn towards Amazon or Kogan.com Ltd (ASX: KGN). That could be a good thing given Afterpay and Zip are payment options on these sorts of websites.
The other option is we hit a recession next year, meaning customers want BNPL services to reduce their upfront spending.
However, if we're looking at a recession in 2020 then Afterpay and Zip shares may not be in a good spot. Less money in terms of wages or an economic slowdown could mean consumers aren't willing to part with their hard-earned dollars.
That means less money spent on non-essential items with merchants and less money for Afterpay and Zip. And for those that do, there could be higher default rates and less actual cash for the companies.
