Like many tech shares, it hasn’t been a great week for the Openpay Group Ltd (ASX: OPY) share price.
As things stand, the buy now pay later (BNPL) provider’s shares are on course to record a weekly decline of 6%.
This will mean the Openpay share price has lost 18% of its value since this time last month.
Is the weakness in the Openpay share price a buying opportunity for investors?
One broker that appears to believe this weakness is a buying opportunity is Shaw and Partners.
According to a recent note, the broker has a retained its buy (high risk) rating but cut its price target on the company’s shares to $4.00.
Based on the latest Openpay share price of $1.93, this price target implies potential upside of over 100%.
What did Shaw & Partners say?
Shaw and Partners was pleased with Openpay’s performance in the third quarter.
It commented: “OPY’s very positive – and accelerating – momentum has continued (very strong 1Q21, 2Q21 and 3Q21 results) with all growth metrics trending in the right direction (number of plans, number of customers, number of merchants, net bad debt, TTV) – all of which translate into solid revenue. Buy retained.”
And while it acknowledges that its bad debts as a percentage of transaction value increased beyond its target rate of 2.5%, it notes that management expects this metric to return to target levels in the short term.
Why is the broker bullish?
There are a number of reasons that Shaw and Partners is bullish on the Openpay share price. One of those is its massive market opportunity.
It explained: “Total Addressable Market (TAM) for BNPL globally is >US$6.5t (comprising US$5.5t, UK $0.63t, Australia US$0.32t and NZ US$0.1t) and OPY’s share of this US wallet is estimated at c. 15%, equating to a mammoth US$829b target market in the US alone.”
“A “back-of-the-envelope” sensitivity by Shaw and Partners with respect to the potential revenue impact of US penetration (market share vs. gross revenue yield) highlights that this significant scale, opportunity and revenue runway, based on relatively conservative assumptions, could potentially yield a quantum leap in revenue generation,” it added.
It notes that the Openpay share price is currently trading at a 35% discount to its BNPL peers on an FY 2021 EV/Sales multiple of 9.3x vs. combined 14.2x.
Overall, this could make it worth considering if you’re looking for exposure to the BNPL sector.