The Openpay Group Ltd (ASX: OPY) share price has been a very strong performer on Tuesday.
At one stage today the buy now pay later provider's shares were up 17% to $3.11.
When the Openpay share price hit that level, it meant it was up 31% since the start of 2021.
Why is the Openpay share price rocketing higher?
Investors have been piling into the buy now pay later (BNPL) industry this year en masse.
This appears to be on the belief that a number of BNPL shares, such as Openpay and Zip Co Ltd (ASX: Z1P), were undervalued in comparison to giants Afterpay Ltd (ASX: APT) and newly Nasdaq-listed Affirm.
Is the Openpay share price undervalued?
Analysts at Shaw and Partners appear to believe the Openpay share price is very cheap at the current level.
The broker currently has a buy rating and $5.00 price target on the company's shares. This implies potential upside of approximately 60% for Openpay shares over the next 12 months.
Why is it bullish?
There are a number of reasons why Shaw and Partners is bullish on Openpay. The first is the structural tailwinds it is experiencing, which are driving mainstream adoption.
It explained: "We expect structural tailwinds to continue to grow adoption from both merchants and customers, driving well above system growth and taking share from major incumbents, whilst growing the size of the overall pie."
Another factor is its competitive advantages.
The broker commented: "OPY has a best-in-breed product. OPY has competitive advantages across three key value chains which include: 1) customers; 2) merchants; and 3) funders – a rare position to be in."
In addition, the broker likes Openpay for its recurring income.
It notes: "Although having relatively short amortisation and book turn metrics compared with a traditional personal finance lender, OPY has a material base of customers, repeat transactions and some duration and repeatability to its book."
A final factor that makes it positive on Openpay is the optionality around further geographies and products. Particularly following its recent B2B deal with Woolworths Group Ltd (ASX: WOW).
The broker explained: "We see opportunity for further growth with penetration into NZ and the UK and then other geographies such as Europe as well. The recent deals with Pentana (cars) and Woolworths (SaaS) are further evidence – and validation – of OPY's broad product offering."
All in all, although the Openpay share price has rallied strongly in 2021, Shaw and Partners appears to believe it can keep on running.
