The buy now, pay later (BNPL) market is red-hot, and related stocks are reaping the benefits or doubling down. Affirm Holdings (NASDAQ:AFRM) exploded from $50 to over $160 since May. Paidy was just acquired by PayPal (NASDAQ:PYPL) for $2.7 billion. Afterpay was acquired by Square (NYSE:SQ) in a $29 billion deal.

Even Amazon (NASDAQ:AMZN), Target (NYSE:TGT) and American Airlines (NASDAQ:AAL) have jumped on the BNPL bandwagon.

However, this may just be the start of a far bigger boom.

As I noted on Oct. 18, “According to Bank of America, the BNPL market could grow 10x to 15x by 2025, and could eventually process up to $1 trillion in transactions.”

By 2030, says Allied Market Research, the BNPL market could be worth $3.98 trillion.

In addition, according to a recent LendingTree survey, “About one-third of shoppers have already financed purchases this way and among those consumers, nearly two-thirds have done so five or more times,” as reported by CNBC contributor Jessica Dickler.

In short, we may be looking at a massive investment opportunity here.

That being said, here are three BNPL stocks to consider:

  • Affirm Holdings (AFRM)
  • PayPal Holdings (PYPL)
  • Square Inc. (SQ)

BNPL Stocks: Affirm Holdings (AFRM)

The last time I weighed in on Affirm Holdings, I said, “With a booming BNPL market, Affirm could see $200 a share, near-term – especially as it partners with the folks over at Amazon.”

That was on Oct. 18, as AFRM stock traded around $132.

Today, it’s up to $154, and I still believe it’ll push to $200.

For one, it just partnered with Amazon, where customers can use BNPL for purchases of $50 and up. Two, Shopify (NYSE:SHOP) is seeing higher average order volume with BNPL with Affirm. Three, Affirm just partnered with Target for the holiday shopping season. Four, through a new partnership with American Airlines, travelers can pay for airfare through BNPL.

Earnings have been just as explosive. Its $261.8 million in revenue in the fourth quarter of 2021 represented a 71% year-over-year gain while its gross merchandise volume (GMV) more than doubled to $2.5 billion. For the full year, GMV rose 79% to $8.3 billion, and they reached about 29,000 active merchants.

PayPal Holdings (PYPL)

Let’s start with this: PayPal Holdings recently acquired Paidy, a Japanese BNPL platform for $2.7 billion.

Not only does the deal give PayPal access to the third-largest e-commerce market in the world, it provides access to Paidy’s six million registered users, and 700,000 merchants. Plus, it’s already accepted at the Top 10 marketplaces in Japan, as noted in a PayPal investor deck.

PayPal also has BNPL offerings in the U.S., France, Germany and the U.K.

Even better, since first launching BNPL, PayPal processed more than $3.5 billion in total payment volume, and has said about seven million consumers have used the BNPL services, according to Reuters.

We’ll see more BNPL numbers when PayPal release Q3 2021 earnings on Nov. 8.

Even aside from BNPL, it’s tough to bet against PayPal’s growth. As of July, it had 403 million active accounts, up 16% year over year. Better, in the second quarter of 2021, it processed 4.7 billion payment transaction, up 27% year over year. Total payment volume grew 40% to $311 billion.

Square (SQ)

Square turned quite a few heads when it acquired Afterpay for $29 billion. Afterpay serves more than 16 million customers world wide, along with around 100,000 merchants.

With it, “Square will easily be able to integrate Afterpay into all of its point-of-sale payment processors at merchant stores, as well as into every online checkout portal the company operates,” says InvestorPlace analyst Luke Lango. “And Square is on both sides of the merchant-seller transaction, enabling them to bring buy now, pay later functionality to a vast array of individuals and businesses.”

The acquisition should also support the broader global reach of Square.

Not to mention, much like PayPal, it’s tough to argue against Square’s growth.

While Q3 brought an earnings miss for Square, revenue rose another 27% to $3.84 billion. Gross profits of $1.13 billion were up 43% year over year. Earnings per share came in at 37 cents per adjusted share.

— Ian Cooper

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Source: Investor Place