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Block (SQ) Experiences Solid BNPL Momentum With Afterpay

Block SQ has been putting strong efforts toward the advancement of Afterpay and bolstering its footprint in order to expand its customer base in the booming buy now, pay later (BNPL) market. These efforts have now turned out to be a boon for the company during this peak shopping season.

This is evident from the robust number of transactions that the company witnessed with Afterpay on Black Friday and Cyber Monday.

Notably, Block experienced more than 61 million transactions across cities, including New York, Brooklyn, London, Los Angeles, San Francisco, Chicago and Toronto.

More precisely, Afterpay’s BNPL transactions were up 120% compared to pre-holiday online and in-person transactions.

Block, Inc. Price and Consensus

Block, Inc. Price and Consensus
Block, Inc. Price and Consensus

Block, Inc. price-consensus-chart | Block, Inc. Quote

SQ to Benefit

According to a report from Square and Afterpay, BNPL is expected to be the most popular mode of transaction during this holiday season.

Food and beverages, hardware, travel and experiences, automotive, and footwear are the item categories growing at a very fast pace on Afterpay. Further, beauty advent calendars, fluffy slides, perfume, sneakers and tracksuits are the most trending online products purchased with Afterpay.

We believe the latest achievement, along with the growing momentum of Afterpay, is likely to contribute well to the transaction growth, gross payment volume (GPV) and top-line growth of the company during this holiday season.

This in turn is likely to aid Block in gaining investors’ confidence in the near term. On a year-to-date basis, Square has lost 62% compared with the industry’s decline of 50%.

In the third quarter of 2022, Afterpay generated $210 million in revenues, which were up 6% on a year-over-year basis.

Growing Initiatives

Block’s growing efforts toward bolstering its presence in the booming BNPL market are noteworthy.

Recently, Afterpay unveiled a new BNPL option — a monthly payment solution to deliver an enhanced payment experience to merchants and their customers. Notably, the new solution allows customers to break the total cost of their purchased items into monthly payments over a six- or 12-month period without any late fees.

This apart, the company recently launched Square’s first integration with Afterpay in Canada, which was previously only available in the United States and Australia.

In addition, the unveiling of Square’s integration with Clearpay (known as Afterpay outside of the U.K. and Europe) in the U.K. remains noteworthy.

Afterpay’s partnership with Sephora, an omni-retailer of beauty products, in a bid to offer the BNPL service to the latter’s customers, is also a positive. Sephora shoppers in the United States enjoy the flexibility of payment in 4 installments for their purchases using the Afterpay app.

Block plans to introduce Afterpay’s BNPL service to Sephora shoppers in Canada later this year.

Afterpay partnered with trusted care retailer Rite Aid to offer the flexibility of paying for everyday items in four installments to the latter’s online customers.

Afterpay teamed up with Hypebeast to offer the flexibility of payment in four installments to shoppers on the latter’s global e-commerce platform — HBX.

With all the above-mentioned endeavors, Block, which currently carries a Zacks Rank #3 (Hold), remains well-poised to capitalize on the growth prospects in the BNPL market.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

According to a Fortune Business Insights report, the global BNPL market is expected to hit $22.86 billion in 2022 and is likely to reach $90.51 billion by 2029, witnessing a CAGR of 21.7% between 2022 and 2029.

Competitive Scenario

The company’s robust BNPL efforts are expected to aid Block in strengthening its competitive position against players like PayPal PYPL, Affirm AFRM and VISA V, which are making strong efforts to bolster their presence in the rapidly growing BNPL market.

More precisely, Block is likely to give cutthroat competition to PayPal, which is witnessing the solid adoption of its BNPL solution — Pay in 4. The company’s introduction of PayPal Pay Monthly, which allows customers to break the total costs of their purchased items into monthly payments over 6-24 months without any late fee, remains noteworthy.

PayPal’s acquisition of Paidy, a Japan-based BNPL solution provider, remains noteworthy.

Affirm is riding on its strategic partnerships. Its collaboration with Amazon to provide installment payment services to shoppers on the latter’s platform remains noteworthy. Affirm’s partnership with Shopify is another positive.

Affirm expanded into Australia through a partnership with Peloton, strengthening its presence in the Asia Pacific region.

Meanwhile, VISA provides a BNPL service called Visa Installments, including three installment models — Pre-Purchase, During Purchase and Post-Purchase — to help customers with flexible payments.

VISA offers its BNPL solution in countries like the United States, Canada, Russia, Australia and Malaysia.

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