High gold prices might prompt producers to mill lower grade stocks Pic: Getty Images
Australia’s BNPL sector has represented the more extreme end of COVID-19 price volatility
Tech
share
Much has been said and written about the cohort of buy now, pay later (BNPL) stocks on the ASX.
And perhaps true to form, based on the price action over the past month few sectors (if any) have shown a higher beta to the broader market swings caused by COVID-19.
The biggest of the group, Afterpay (ASX:APT), slumped from a pre-crisis high above $40, all the way to a low of $8.01 when the first wave of virus-related selling reached its Zenith on March 23.
Since those intra-day lows, both Afterpay — along with Sezzle (ASX:SZL), Zip Co (ASX:Z1P) and Splitit (ASX:SPT) — have all generated returns well above 100 per cent.
Here’s the gains to 11am EST this morning, after local markets opened in positive territory following a strong US lead:
| Code | Name | Price | % Chg from lows |
|---|---|---|---|
| APT | Afterpay Touch | 30.2 | 277% |
| Z1P | Zip Co | 2.42 | 130% |
| SZL | Sezzle Inc | 1.4 | 300% |
| SPT | Splitit | 0.52 | 154% |
As a previously red-hot sector tied directly to consumer spending, the market turned equally bearish after assessing the prospect of an unprecedented downside shock.
But the v-shaped recovery (for now) is reflective of how investors value stocks in the space, with excitement around future earnings potential continuing to drive much sharper price moves than the broader market.
Sentiment was helped by market updates from three of the companies — Afterpay, Sezzle and Zip Co — in early April which showed a relatively small impact on Q1 trading numbers.
For example, Afterpay ripped higher by another 29 per cent after releasing its business update on Monday.
The company added that currently, “it is difficult to identify any sustained trends, in any of our regions, as a result of the impacts from COVID-19”.
Zip Co highlighted a spate of new partnership agreements and cost-cutting measures (including reducing its full-time workforce by 20 per cent), while Sezzle cited itself as a beneficiary of the shift towards e-commerce as consumers are forced to shop from home.
Whatever happens next, if the current price trend continues the BNPL sector is set to maintain its standing as one of the more extreme investor barometers for bullish or bearish sentiment.
Read MoreBuy Now Pay Later - BNPL
