Can the Openpay (ASX:OPY) share price double in value?

The Openpay Group Ltd (ASX:OPY) share price could double in value from here according to one leading broker. Here's why…

| More on:
asx share price increase represented by golden dollar sign rocketing out from white domes of lithium

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Like many tech shares, it hasn't been a great week for the Openpay Group Ltd (ASX: OPY) share price.

As things stand, the buy now pay later (BNPL) provider's shares are on course to record a weekly decline of 6%.

This will mean the Openpay share price has lost 18% of its value since this time last month.

Is the weakness in the Openpay share price a buying opportunity for investors?

One broker that appears to believe this weakness is a buying opportunity is Shaw and Partners.

According to a recent note, the broker has a retained its buy (high risk) rating but cut its price target on the company's shares to $4.00.

Based on the latest Openpay share price of $1.93, this price target implies potential upside of over 100%.

What did Shaw & Partners say?

Shaw and Partners was pleased with Openpay's performance in the third quarter.

It commented: "OPY's very positive – and accelerating – momentum has continued (very strong 1Q21, 2Q21 and 3Q21 results) with all growth metrics trending in the right direction (number of plans, number of customers, number of merchants, net bad debt, TTV) – all of which translate into solid revenue. Buy retained."

And while it acknowledges that its bad debts as a percentage of transaction value increased beyond its target rate of 2.5%, it notes that management expects this metric to return to target levels in the short term.

Why is the broker bullish?

There are a number of reasons that Shaw and Partners is bullish on the Openpay share price. One of those is its massive market opportunity.

It explained: "Total Addressable Market (TAM) for BNPL globally is >US$6.5t (comprising US$5.5t, UK $0.63t, Australia US$0.32t and NZ US$0.1t) and OPY's share of this US wallet is estimated at c. 15%, equating to a mammoth US$829b target market in the US alone."

"A "back-of-the-envelope" sensitivity by Shaw and Partners with respect to the potential revenue impact of US penetration (market share vs. gross revenue yield) highlights that this significant scale, opportunity and revenue runway, based on relatively conservative assumptions, could potentially yield a quantum leap in revenue generation," it added.

In addition to this, the broker believes its shares offer significant value for money in comparison to rivals Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P).

It notes that the Openpay share price is currently trading at a 35% discount to its BNPL peers on an FY 2021 EV/Sales multiple of 9.3x vs. combined 14.2x.

Overall, this could make it worth considering if you're looking for exposure to the BNPL sector.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

Ecstatic woman looking at her phone outside with her fist pumped.
Broker Notes

These ASX 200 shares could rise 15% to 30%

Let's see what brokers are saying about these buy-rated top stocks.

Read more »

A female stockbroker reviews share price performance in her office with the city shown in the background through her windows
Broker Notes

JP Morgan initiates coverage of Guzman Y Gomez shares. What's its price target?

Does the broker expect Guzman Y Gomez to outperform?

Read more »

Happy man working on his laptop.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Boss Energy shares have surged 93% since April. Here's what Macquarie expects now

Boss Energy shares remain a favourite for ASX short sellers. Are they in a for a payday or headed for…

Read more »

Business meeting to discuss buy now pay later platform
Broker Notes

Macquarie tips substantial upside for Steadfast shares

Steadfast is a high-quality business at an attractive valuation, according to the broker.

Read more »

A man and woman sit next to each other looking at each other and feeling excited and surprised after reading good news about their shares on a laptop.
Broker Notes

These ASX 200 shares could rise 55% to 65%

Analysts think these shares are dirt cheap at current levels.

Read more »

Young man with a laptop in hand watching stocks and trends on a digital chart.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Broker Notes

Why DroneShield, Nickel Industries, and CSL shares could be best buys

Let's see why Bell Potter is so bullish on these shares.

Read more »