There is quite some significant misconceptions here between public sentiment of Z1P and SZL, mainly from less-experienced investors. I will share my thesis here on why SZL will eclipse Z1P's market capitalization in the long-term. Keep in mind I am still very bullish on BNPL in the long-term as I believe they will become the default form of expenditure by the next generation. Cathie Woods has touched on this in regards to millennial spending patterns and I believe she is correct.
Z1P is currently valued at 3.25x Sezzle's MC (6.6B vs 2B). Naturally as Z1P are the more mature company, and have a well-established ANZ business already, and QuadPay in the US, their comparative valuation is justified at this current point in time.
However, Z1P does not have much growth left in ANZ as shown in their recent Quarterly Update, so its future growth will be dependent entirely on QuadPay, which it has paid a huge sum to acquire. QuadPay has been doing quite well as of late, we give kudos where it is due.
But, I believe Sezzle is in a much better position than Z1P as of current. The thing that really separates Sezzle from the BNPL crowd is its unique strategy, which I believe will allow it to attain a significant advantage over other BNPLs. The BNPL sector has a relatively low barrier for entry, it doesn't require any proprietary software, and features can be copied and implemented across various different BNPLs with little consequence. So how does a BNPL ensure its survival against growing competition and the fierce battle for consumer attention?
The key is to establish market dominance first. Be the industry leader. Gain a controlling share of the market before any competitors can emerge, as a result consumers will be less likely to switch as they already have the default option. Just like what Uber did. Z1P hasn't done this, they have just followed the big brother APT, but Sezzle has, and that will make all the difference moving forward.
Sezzle currently has 27k Merchants. Quadpay has 8.4k in comparison. What Sezzle has done, is that they have targeted the boutique stores first, before going for the larger clients. They have essentially achieved a market monopoly over the boutique niche and control over that domain, and are the market leader of this niche. This gives them a slice of the market that won't be disturbed by future competitors as they have become the de-facto BNPL provider for Boutique firms and secured that position for themselves. Now they will be moving for the larger enterprise clients as both QuadPay and Afterpay have done initially, which means there is still huge potential for them to grow by leveraging this untapped market for them.
Furthermore Sezzle is going for India and Canada, both of which have significant more growth rate moving forward. They are going for areas which Afterpay and Z1P and other BNPLs haven't gone for yet. This will allow them to become the market leader in those areas and achieve dominance first, just like Uber . Future BNPLs in those areas will have to convince consumers to move away from Sezzle, which will be significantly more difficult. Just imagine OpenPay trying to convince a user to switch from Afterpay to their platform. Now Z1P is just trying to chase APT into the US and UK markets, which does work in the mid-term, but leaves them open as their position is insecure and not insulated from future competitors.
Anyways, this is my conclusion for why I see Sezzle surpassing Z1P in the long-run. For the record, I hold a significant Sezzle position.
SZL Price at posting:
$10.35 Sentiment: Buy Disclosure: Held
