The Openpay Group Ltd (ASX:OPY) share price has latched onto the momentum of the buy now, pay later (BNPL) sector and soared more than 10% higher in today’s trade. It has since pulled back to be up 3.93% to $2.91 at the time of writing.
How much higher can the Openpay share price go and is it too late to buy?
What is fuelling the Openpay share price?
Following today’s price action, the Openpay share price has surged more than 38% since the start of July. Considering the company has not released any price-sensitive news within that time, it’s fair to assume that investors and traders are jumping on Openpay shares as the BNPL sector soars.
Fuelled by the raging Afterpay Ltd (ASX:APT) share price, other companies in the BNPL sector have performed strongly over the past few weeks. Zip Co Ltd (ASX:Z1P) and Sezzle Inc (ASX:SZL) are also both trading at all-time highs after seeing monster share price gains recently.
What does Openpay do?
Openpay is yet another payment solutions company that services the fast-growing BNPL sector. In comparison with other operators, Openpay offers larger payment plans, financing purchases up to $20,000, and offers payment ranges between 2 and 24 months with no interest.
Openpay services a range of specialised industries such as automotive, healthcare and home improvements, boasting notable brands such as UltraTune, Total Tools and Bunnings. The company services customers in Australia, the UK and New Zealand.
How has Openpay performed during the pandemic?
In early March, Openpay released a response to the COVID-19 pandemic, assuring investors that the company remained in a strong financial position with $45.7 million cash on hand. The company also highlighted that its established online presence and strong technology will allow it to adapt to increased demands in online trading.
The company completed a $33.7 million capital raise in early June. According to Openpay’s management, proceeds from the placement will be used to support the company’s future growth strategies. These include growing the company’s presence in its core markets, investing in product development and facilitating strategic growth partnerships.
Is it too late to buy shares in Openpay?
Apart from surging in the past month, the Openpay share price has rocketed more than 800% since late March. In my opinion, the short-term trajectory of the price action is unsustainable. Therefore, I can’t advocate buying shares in Openpay after such a phenomenal rally.
I think a more prudent strategy would be to wait until the August reporting season to get a better idea of how companies in the BNPL have fared during the pandemic and how they’re positioned for the future.
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Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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