Openpay share price on the move after record quarterly growth

The Openpay Group Ltd (ASX: OPY) share price jumped more than 5% in early trade to hit a record high of $4.98 per share, before dropping back shortly after. This share price action comes on the back of a strong quarterly update released by the company before market open.

At the time of writing, the Openpay share price is trading at $4.41 per share, up 0.23% on yesterday’s close.

What did Openpay announce today?

The Aussie buy now, pay later (BNPL) company’s growth just doesn’t seem to stop. Openpay achieved record growth across multiple leading indicators in the fourth quarter of FY20. That includes active plan numbers up 229% from last year, active customer numbers up 141% and active merchants up 52% from Q4 FY19.

Total transaction value (TTV) jumped 98.2% for the full year to $192.8 million. TTV was also up 119% for the quarter compared to Q4 FY19. Full year revenue climbed 64% compared to FY19, while online channel contributions rose to 39% of plan originations.

That’s good news for the BNPL company in the current environment. Tighter coronavirus restrictions have impacted brick-and-mortar retail sales in 2020. However, a growing online sales function could be the key to strong growth in 2020.

The company’s net bad debts also caught my eye this morning. Keeping bad debts low while growing the book is a key factor for long-term scalability. Openpay ticked that box in Q4 FY20, with net bad debts as a percentage of TTV falling to less than 2.9%, compared to 4.7% last quarter.

In terms of balance sheet strength, things are also looking good. Openpay has a 25 million-pound (A$45 million) facility and recently completed a $33.77 million equity raising. As a result, cash on hand grew to $70.1 million as at quarter end, with significant undrawn debt at its disposal.

It’s no surprise the Openpay share price started strongly this morning following the news. The Aussie fintech’s shares have already rocketed more than 1,200% higher since the March bear market.

Is the Openpay share price in the buy zone?

Overall, there aren’t too many negatives from today’s announcement. While investors sold out of the industry in February and March, BNPL shares are a hot commodity.

However, the Openpay share price has been on an extreme bull run. That could continue in 2020 but I don’t think the pace is sustainable in the long-term.

The group’s strong integration with Woolworths Group Ltd (ASX: WOW) through its Business with Woolworths program is “well progressed” to deliver revenues in 1H FY21.

Before buying in, I think I’d like to see more of these initiatives and longer-term revenue profile. On that note, Openpay also announced a strategic partnership with ASX healthcare group 1st Group Limited (ASX: 1ST) this morning as part of its continued expansion.

However, if you’re bullish on the BNPL sector, Openpay may be as good an option as Afterpay Ltd (ASX: APT) right now. Afterpay shares have also rocketed higher this morning on the back of Openpay’s strong update.

More reading

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• Is Altium still a leading ASX 200 tech share to buy?
• This could be a problem for the Afterpay share price
• ASX 200 drops 0.6% today, Afterpay share price down 7%
• Is the Coles share price still attractive after it surged to a record high today?

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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