Broker note on Klarna, BNPL Market inc Z1P

From a research note:

US a battleground – Klarna’s total customers in the US has hit 11 million, with Klarnaseeing a pick-up in customer adds in recent weeks as well as announcing a numberof enterprise merchants additions in recent months (Gamestop, Macy’s , Etsy,Express etc.). The acceleration in Klarna’s customer additions and the launch ofPayPal does not seem to be impacting Afterpay and Quadpay’s growth in the USgiven both companies have reported a pick-up in customers in 2Q to date. That beingsaid, we do think Afterpay should look at opening up its network by adding a curated‘Shop Anywhere’ offering to its loyalty members (see our report here). Further, wesee Quadpay as more exposed from a competition perspective given its lack of scale.

Is Z1P too late entering the UK? – Z1P has gone live with a ‘Pay in 4’ offering with150 merchants in the UK, including enterprise merchants such as JD Sports, Boohoo,Fanatics. Klarna is the market leader in the UK and Afterpay, LayBuy and OpenPayhave a head start compared to Z1P. While Z1P’s global presence is a differentiatorcompared to some of the smaller players and UK represents a large addressablemarket, given the lack of an early mover advantage, Z1P may need to spend moreon marketing (incl. co-marketing) to grow in the UK.

XXX View on Afterpay and Zip – While we see upside risks to our Afterpay forecasts,with the stock trading at 28x EV/Revenue (XXX est.) we do not think the shares meritfurther multiple expansion from current levels. While we see downside risks to Zip’smedium term growth and margins from increasing competition, we are Neutral/HighRisk rated as we expect strong growth in the near term driven by the US and thelaunch of new products such as ‘Tap & Zip’.