Buy Now, Profit Later: 3 Stocks Capitalizing on BNPL Trend

Stocks to buy

If you’ve been paying attention to holiday-driven retail sales, the concept of buy now, pay later or BNPL stock opportunities will have likely tickled your fancy. Yes, people are still spending money on discretionary items, which offers encouragement. But it’s how they’re doing it that has piqued curiosity.

According to The Wall Street Journal, the Black Friday season came in hot, especially considering the difficulties consumers face. From stubbornly high inflation to simultaneously rising borrowing costs, the gift-giving cycle has been a little bit less joyous. Nevertheless, many folks are making their dollars stretch through BNPL platforms. You might even call the underlying investment thesis buy now profit later stocks.

To be sure, the narrative carries risks. Yes, the BNPL trend caught the mainstream media’s attention. However, many if not most of these enterprises suffered heavy market losses from their post-pandemic peaks as sentiment shifted from retail revenge to revenge travel.

Are we back to heightened retail therapy again? If you believe so, below are the BNPL stock opportunities to consider.

Block (SQ)

Source: Sergei Elagin / Shutterstock.com

What it is: A financial technology (fintech) player and payments specialist formerly known as Square, Block (NYSE:SQ) offers a range of products, including the popular service Afterpay. In addition, Block caters to hip, upwardly mobile consumer demographics, representing an outspoken advocate for cryptocurrencies. While SQ is only up 7% year-to-date, it has soared over 34% in the trailing month.

Relevance: In early 2022, Block closed its acquisition of Afterpay, making it a major name among BNPL stock opportunities. According to Block’s press release regarding the matter, almost 56% of U.S. consumers have used a BNPL service. Further, the younger demographics of Generation Z and millennials represent 75% of BNPL users.

Pros: For SQ, it ranks among the so-called buy now profit later stocks because of that hated but relevant word “synergy.” Essentially, Block combines its large user base and extensive merchant network to tap into this viable arena.

Cons: Similar to other players, due to the hot BNPL trend, competition will be stiff. Further, while SQ enjoys a strong buy consensus view among analysts, the average price target of $72.40 implies less than 5% upside.

PayPal (PYPL)

What it is: A multinational online payments company, PayPal (NASDAQ:PYPL) – founded in December 1998 – has been doing fintech before that term became popularized. Fundamentally, the underlying platform services as an electronic alternative to traditional paper-based transactions such as checks and money orders. It also plays an invaluable role for businesses, particularly small and independent ones under the burgeoning gig economy.

Relevance: Back in early 2021, the company announced a new directive called Pay in 4. This fresh offering allowed consumers to split eligible purchases ranging from $50 to $1,500 across four equal, interest-free instalments. Further, automatic re-payments were drawn every two weeks. Plus, users incurred no fees so long as the payments transacted on time.

Pros: It has a massive global footprint, making it a strong contender for buy now profit later stocks. Also, analysts rate PYPL as a consensus moderate buy with a $73.13 price target, projecting 24% upside.

Cons: Although one of the more compelling BNPL stock opportunities, it also represents a later entrant to the arena. Also, the company has relative limited in-store payment transactions versus total payment volume.

Sezzle (SEZL)

Source: Joyseulay / Shutterstock.com

What it is: For the ultimate speculator in BNPL stock opportunities, Sezzle (NASDAQ:SEZL) definitely brings the spice. A pure-play entrant for the burgeoning BNPL trend, Sezzle offers flexible payment options for both online and in-store purchases. Per its website, it primarily advertises the ability to pay for purchases in four interest-free payments over a six-week period.

Relevance: Straight from the horse’s mouth, Sezzle explains via its website that it’s a rapidly growing fintech enterprise on a mission to financially empower the next generation. Based on its headline, we’re talking millennials and increasingly Generation Z. As stated earlier, the bulk of BNPL adoption centers on these age cohorts. Therefore, SEZL makes an interesting narrative for buy now profit later stocks.

Pros: For market gamblers, the underlying wildness of the stock fuels the speculative thirst. In the week ended Dec. 8, SEZL gained almost 25% of equity value. You’re not getting that kind of performance from the other BNPL stock opportunities.

Cons: It’s [expletive] risky, seeing as how it only features a market capitalization of $70.91 million. Since the January opener, SEZL collapsed almost 85%. You’re also not getting that kind of “performance” from the other BNPL stock opportunities.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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