Growth is stellar for payments operator
-Increasing competition a risk but growth still substantial
-Leading the sector on net customer additions
-Structural tailwinds strengthening despite risks
Is
The company's US entity, QuadPay, put in a stellar performance in the March quarter, with total transaction value (TTV) growth of 234%. While the number of transactions grew significantly in
Yet, the top line is still expected to grow rapidly and the broker continues to believe in management's strategy although, as this is a relatively early-stage investment with significant execution risks, a Sell rating is maintained.
Citi, on the other hand, is buoyed by the latest numbers, particularly for QuadPay. While acknowledging increasing competition is a risk to growth and profitability over the medium term, the broker notes US BNPL (buy now pay later) penetration is low and QuadPay's Shop Anywhere offering is likely to drive growth in the short term.
Citi asserts
Citi expects revenue growth for
The broker envisages BNPL will end up being a "winner takes most" market, although there are risks to medium-term growth forecasts and margins for
Furthermore,
There were 674,000 new shoppers added to the US platform during the quarter, a seasonally quiet period for retail/BNPL. QuadPay, Morgans notes, is now annualising an impressive
The broker finds the US expansion highly encouraging and anticipates longer-term upside if
International Expansion
International expansion continued during the third quarter with strategic investments in
International markets stood out for Shaw and this underpins the valuation, with international TTV estimates, conservatively, upgraded to
BNPL Risks
The BNPL sector has been a material beneficiary of economic stimulus but
The broker highlights the risks in particular to fourth quarter forecasts for
Macquarie has assessed the 46 submissions from industry participants to the Australian payment system review being conducted by the Australian government and due for completion in the next few weeks.
The broker, which has an Underperform rating, notes around 63% of stakeholders referenced BNPL, which highlights the significance of that emerging sector. Respondents, in the main, were looking for more government regulation.
Macquarie notes around one third of the submissions made critical comments regarding BNPL. In particular the unequal playing field. As a result, the broker is convinced there will be "more pain before gain" for the BNPLs and, beyond industry consolidation, envisages increasing regulatory pressure as a key risk.
Yet, Shaw considers
The broker asserts the company's functionality and app-based product is misunderstood. Customers are able to conduct a transaction anywhere and margins in the app globally are greater compared with direct integration because of the latter's mix of interchange, affiliate and customer fees.
This lends strength to a segment which is increasingly being utilised. The broker expects more app-based products will be launched with a focus on the millennials market with crypto currency, stocks and other lending products launching off the
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