Were there any four letters hotter than B-N-P-L (buy now, pay later) on the ASX in 2020? I think not. BNPL shares have confounded and delighted ASX investors for years now. After a thunderous 2019 (and 2018, and 2017), many were predicting that the sector would blow off some steam in 2020 as investors eventually came back to Earth.
The opposite has occurred. Not only have some BNPL shares outperformed almost every other ASX share in the financials sector, but some have handily outperformed most ASX blue chips. Especially if you take their performances since the March share market crash. But some others haven't, and instead delivered handy losses.
Let's have a look:
| ASX BNPL share | YTD share price gain (as of 17 December) | Market capitalisation |
|---|---|---|
| Afterpay Ltd (ASX: APT) | 292.78% | $34.29 billion |
| Sezzle Inc (ASX: SZL) | 289.76% | $657.34 million |
| Openpay Group Ltd (ASX: OPY) | 97.58% | $264.63 million |
| Splitit Ltd (ASX: SPT) | 85.07% | $553.44 million |
| Zip Co Ltd (ASX: Z1P) | 59.04% | $2.92 billion |
| Zebit Inc (ASX: ZBT) | (1.9%) | $97.24 million |
| Laybuy Holdings Ltd (ASX: LBY) | (35.37%) | $231.16 million |
| Humm Group Ltd (ASX: HUM) | (35.65%) | $576.99 million |
Image source: Getty Images
Afterpay still sits on the BNPL throne
No surprises as to the king of this particular hill. BNPL pioneer and titan Afterpay comes in at the front of the pack so far for 2020. At the time of writing, the Afterpay share price has in fact just made a fresh new all-time high of $120.77, putting its year-to-date gains at almost 300% – an eye-watering sum on its own, but especially so if you consider that Afterpay also banked year-to-date gains of more than 100% in both 2018 and 2019 as well (close to 150% for the latter).
And here's the real kicker: Afterpay shares plummeted all the way down to $8.01 at one point during the March share market crash. If you count the gains between 23 March and today, the Afterpay share price has returned 1,402%.
So what has gone so right for this company? Well, quite a lot, as it turns out.
Back in May, Afterpay announced that the Chinese gaming and e-commerce giant Tencent Holdings had acquired a 5% stake in the company. At the time, investors were a little worried that the coronavirus-induced recession would 'pop the Afterpay bubble' by eliciting a wave of payment delinquency. That, as it turns out, did not come to pass. But at the time, the Tencent move shored up a lot of confidence. Especially when Afterpay's management said the deal would help the company expand into the Asian region.
Since then, it has only been onwards and upwards for Afterpay. The company announced some stunning growth numbers in its FY2020 earnings report, and later made inclusion into both the ASX 50 and the ASX 20 indexes. All of these factors have worked marvelously for sentiment surrounding Afterpay shares, and have likely been the driving factors behind the recent all-time highs.
Some other top performers
But it's not just Afterpay that's been doing well in 2020. Sezzle has also been a top performer. It claims the No. 2 spot on 2020's BNPL gainers, but also outperforms even Afterpay since 23 March, giving investors a 1,749% gain to today.
We can probably thank raw growth for these gains. Just this month, Sezzle reported that underlying merchant sales for the month of November 2020 were 188.5% higher than November 2019.
Turning to Openpay and we have an interesting story. Yes, Openpay shares are up a more-than-respectable 97.58% for the year. However, the Openpay share price remains more than 50% below its 52-week high of $4.98 seen back in September. At that point, Openpay was up around 280% year to date. What happened? Well, it's not clear. Openpay is still growing at a healthy clip. It recently reported record user growth and transactional volume across both October and November. Perhaps investors just decided they wanted Afterpay shares instead.
Split and Zip
We see a similar pattern with Splitit. The Splitit share price is also boasting healthy year-to-date gains on today's prices. But it is also down around 33% from its 2020 high watermark. Again, we have seen some strong numbers out of the company recently. At the end of October, Splitit reported 214% year-on-year growth in sales volume, and a 318% increase in quarterly revenue over the prior corresponding period. It also touted some ambitious expansion plans over in the United States.
Turning now to Zip Co, the perpetual 'bridesmaid' of the BNPL shares. Zip's successes have been a little more muted in 2020 than the companies we've discussed so far. And, like Openpay and Splitit, Zip shares are also quite a way from their own 52-week high. Back in September, the Zip share price hit $10.64, more than 40% away from its current share price.
With this company, investors were initially highly welcoming of Zip's acquisition of the US-based QuadPay that was announced back in June. Zip's subsequent trend lower can likely be put down to (again) investors preferring Afterpay, or perhaps as a result of some negative broker attention over the past few months.
Some not-so-impressive BNPL shares
Now to the losers of the group – Laybuy, Humm and Zebit.
Laybuy and Zebit both only had their initial public offerings (IPOs) in 2020, Zebit just back in October. The BNPL sector has attracted a lot of froth and volatility in 2020, as you've probably picked up. These kinds of IPOs tend to attract investors trying to make a quick buck, as it were. A similar pattern emerged with both companies' floats: a spike, followed by net selling pressure.
Finally, let's look at Humm (formerly known as FlexiGroup until last month), the wooden spoon recipient of the ASX's BNPL shares. Humm has posted some unimpressive numbers in 2020, including a 62% drop in profits for FY2020 back in July, and has recently launched into the New Zealand market. However, its modest growth compared to its peers and a recent capital raise seems to have dimmed investors' appreciation of this company. The Humm share price remains down by almost a third in 2020 so far.
