The buy now pay later stocks have, to our minds, been essentially a regulatory arbitrage play. We view them as unsecured credit, to credits of dubious creditworthiness, for items that are not essential (hence highly discretionary) and untested over an economic cycle.
The merchant fee issue has remained contentious (creating an overhang) to BNPL stocks.
Our process is a QGARP function (Quality Growth at a Reasonable Price). 2 of the 3 criterion are not meaningfully met here, which wouldn’t necessarily completely rule out a prospective investment, on its own…
…but given the regulatory and cyclical risks associated with the business models on offer, it combines sufficiently unfavourably that are happy to avoid the space.
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