Why the Openpay share price rose at the open on Monday

Openpay share price gains on business update

The Openpay (OPY) share price rose on Monday, 21 September – hitting a morning high of $3.10 per share – after reporting record growth across the August month.

Overall, the company revealed robust growth across all of its key operational metrics in August, with active plans and customers recording record growth, while total transaction volumes and revenues also surged.

Commenting on these results, the company’s Chief Executive Officer, Michael Eidel said:

'Openpay has continued its robust start to FY21 with strong growth across leading indicators in August, despite ongoing macroeconomic uncertainty and continued stage 4 restrictions in Victoria.’

'We consumers continued to seek better wats to structure purchases across their lifestyle needs, we again saw a strong surge in new customers and plans during August.'

Investors responded with moderate enthusiasm to this update, bidding the stock to a morning high of $3.10 per share by 10:42 AM. Despite that positive price action, Openpay – as well as many other stocks in the buy now pay later space – continue to trade off their recent highs, as competition concerns plague the sector.

Key results in focus

Overall, in August and on a year-over-year basis, Openpay reported that:

• Active plans more than tripled, rising 237% during the month
• Active customers surged 147%
• Active merchants grew 40%

In step with those results, Openpay saw significantly more transactions processed through its platform, with total transaction values across August rising 88% (YoY), to $22.7 million. Revenues also improved, reaching $2.0 million during the month; while bad debts as a percentage of total transaction volumes hit 1.53%, a figure described as ‘stable’.

The company attributed this growth to ‘accelerated e-commerce growth in Australia’ and improving trading volumes in the UK. For reference, the largest gains were made in the online automotive and healthcare segments.

From a strategic perspective, Openpay’s management also took today’s release as a chance to highlight a number of key strategic partnerships finalised in August. Some of these partnerships include: JD Sports Australia, building on the relationship establishing with JD’s UK arm; ezyVet, as well as the announcement that Openpay's BNPL functionality would be offered across the Hut Group’s e-commerce brand offerings.

PayPal…friend or foe?

PayPal’s entrance into the BNPL sector – with its soon to be rolled-out Pay in 4 functionality – looks to be one of the leading drivers of the recent weakness across ASX-listed BNPL stocks.

Alluding to PayPal’s planned entrance into the space, Openpay’s management noted that:

'Recently, the BNPL sector has seen some further market entrants, which confirm the enormous potential of this new way to pay and will lead to accelerated proliferation.'

The growth of the sector indeed represents a double edged sword. As UBS analysts recently put it:

‘The faster BNPL grows and succeeds it will inevitably attract new competition and/or regulation, that will either reduce the economics currently enjoyed by participants, or limits their long term growth potential.’

In spite of increased competition, Openpay took the chance to stress the differentiated nature of its BNPL offering – highlighting the budget-centric and longer-term nature of its BNPL plans.

What are your thoughts on the BNPL sector…

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