BNPL (Buy Now, Pay Later) is a sort of short-term financing that allows customers to buy purchases now and pay for them later, sometimes without incurring interest. BNPL agreements, sometimes known as point-of-sale installment loans, are increasingly becoming a more common payment alternative, especially when purchasing online. Consumers may find BNPL financing to be easy, but there are certain things to consider.
Consumers usually pay a portion of the purchase price upfront, then spend the rest in a certain number of installments. Unlike standard credit cards or lines of credit, buy now, pay later options frequently do not carry interest and are generally easier to obtain approval for. BNPL does not affect your credit score in most cases; nevertheless, late payments or failure to pay might hurt your credit score.
The BNPL business is booming, and connected stocks are either profiting or doubling down. Since May, Affirm Holdings (AFRM)’s price has risen exponentially. PayPal (PYPL) just purchased Paidy for $2.7 billion. In a $29 billion agreement, Square (SQ) purchased Afterpay. Amazon (AMZN), Target (TGT), and even American Airlines (AAL) are among the companies that have also joined the BNPL bandwagon. The BNPL market, according to Bank of America (BAC), may increase 10x to 15x by 2025, processing up to $1 trillion in transactions.
Let’s take a peek at three BNPL stocks that the experts consider smart picks for our growing portfolios:
Affirm Holdings (AFRM)
Affirm (AFRM) has announced a partnership with Amazon (AMZN), allowing users to utilize BNPL for purchases of $50 or more. Secondly, with BNPL and Affirm, Shopify (SHOP) is witnessing increased average order volume. Thirdly, AFRM has just announced a Christmas shopping partnership with Target (TGT). Not to mention, travelers may now pay for airfare through BNPL thanks to a new relationship with American Airlines (AAL).
AFRM’s earnings have risen at a similar rate. Its fourth-quarter sales of $261.8 million were up 71% year-over-year, while its gross merchandise volume (GMV) more than doubled to $2.5 billion. GMV increased by 79% to $8.3 billion for the whole year, and AFRM now has over 29,000 active merchants. With the current quarter showing $324.7 million in sales, analysts’ forecasts are very optimistic in terms of both quarterly and annual growth for EPS/Revenue. The consensus price target for AFRM from analysts that provide 12-month predictions is 177.50, with a high of 220.00 and a low of 110.00. The median estimate is up 23.81% from the current price, and experts give AFRM a buy rating.
Square Inc (SQ)
Square, Inc. (SQ) is a company that specializes in credit card payment processing. It’s a unified commerce environment that assists sellers in launching, running, and growing their enterprises. When a company’s sellers download the Square Point of Sale smartphone app, they may collect their first payment fast and efficiently, usually within minutes. When SQ paid $29 billion for Afterpay, it turned a lot of heads. More than 16 million clients and 100,000 merchants use Afterpay throughout the world.
It’s difficult to disagree with SQ‘s growth. Despite a loss in the third quarter, SQ‘s sales increased by 27% to $3.84 billion. The company’s gross earnings increased by 43% year-over-year to $1.13 billion. The adjusted EPS came in at 37 cents per share. SQ has handily beaten Wall St’s revenue predictions, and there is healthy growth forecasted for the business, regarding both EPS and Revenue. They show us 27 cents per share and $4.1 billion in sales for the quarter so far. The median price target for SQ from analysts that provide 12-month price projections is 305.00, with a high of 380.00 and a low of 210.00. The estimate is up 31.88% from its previous price. The consensus is to buy stock in SQ.
PayPal Holdings Inc (PYPL)
What would this list be without at least mentioning PYPL? It’s a company that develops technology for digital payments. The company runs a two-sided unique worldwide technology platform that connects clients, including merchants and consumers, to make payment processing easier. PYPL just paid $2.7 billion for Paidy, a Japanese BNPL platform. The agreement gives PYPL access to the world’s third-largest e-commerce industry, as well as Paidy’s six million registered customers and 700,000 merchants. PayPal also offers BNPL in the US, France, Germany, and the United Kingdom.
Even better, PYPL has handled more than $3.5 billion in total payment volume since launching BNPL and has stated that roughly seven million users have utilized its BNPL services. As far as PYPL’s financials go, it’s impressive to note that they have bested analysts’ EPS projections for the previous four consecutive quarters. PYPL’s recent year-over-year numbers indicate growth, as do the quarterly and annual EPS/Revenue forecasts. Until reporting again, they show us an EPS of $1.12 per share and $6.8 billion in sales. The consensus price target for PYPL from analysts that provide 12-month predictions is 277.50, with a high of 345.00 and a low of 172.00. The median estimate implies an increase of 38.11% over its previous price, and PYPL’s buy rating from experts is enthusiastic.
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