The Afterpay Ltd (ASX: APT) share price is making a serious comeback in April, up almost 25% this month and up 3.02% to $124.86 at the time of writing.
What's driving the Afterpay share price?
The Afterpay share price could be benefiting from rival Zip Co Ltd (ASX: Z1P) and its quarterly update.
In this update, Zip highlighted an 80% increase in group quarterly revenue to $114.4 million. This growth was driven by a 195% increase in transaction numbers to 12.4 million. Additionally, there was a 144% increase in transaction volume to $1.6 billion.
Zip's US-based QuadPay business was a key driver of growth, with transaction volume growing 234% to $762 million. This translates to a 188% increase in revenue to $54.4 million.
The US and its $5 trillion retail market represents an integral part of many ASX-listed buy now pay later (BNPL) growth stories. In the case of Zip, the US has contributed an increasing percentage of group revenue. In 1H20, the US represented 28.50% of revenue. This increased to 43.36% in 1H21 and 47.55% in today's Q3 update.
Afterpay retains a similar narrative where its US and UK businesses are playing a greater role in its earnings. In the company half-year results, the US contributed approximately 42.8% of its sales, up from 38% in 1Q21.
Good for Zip and great for Afterpay
Zip's triple-digit growth across key reporting metrics in the US signals continued momentum in the world's largest economy.
With Afterpay more than doubling Zip in active customers in the US, good news for Zip spells great news for Afterpay.
Delivering strong growth figures is also important in addressing the recent concerns of rising competition in the BNPL sector.
If Zip's results were to miss expectations, then it could signal the BNPL sector is getting too crowded or new competitors such as Commonwealth Bank of Australia (ASX: CBA) and PayPal are winning out.
Why it might be worth watching Affirm
The Zip and Afterpay share price have bounced strongly in April after a sharp selloff in early February. However, it's been a different story for leading US-listed BNPL, Affirm Holdings Inc (NASDAQ: AFRM).
The Affirm share price topped out in line with the broader tech and BNPL sell-off in early February. Its shares slumped more than 50% from US$146.90 on 10 February to a low of US$65.65 on 30 March. Despite strength coming back into the tech sector and BNPL shares, the Affirm share price closed almost 4% lower to US$67.93 on Monday night.
