The eye-popping numbers keep rolling in.

Online shoppers spent a record $9.8 billion on Black Friday. Over the next two days, ‘Cyber Weekend’, they spent an additional $10.3 billion. It was all a prelude to what is expected to have been a more than $12 billion online shopping spree on Cyber Monday. 

These figures, however, should come with an asterisk — not everyone actually paid for their purchases.

According to Adobe Analytics, much of this year’s jump in e-commerce activity was fueled by buy now, pay later (BNPL) options. With inflation still taking a bite out of consumer purchasing power, many Americans have turned to BNPL to give their stressed budgets some much-needed relief. Adobe reported that BNPL orders surged 72% week-over-week from November 18th to November 24th. 

So, while online retailers like Amazon, Etsy, and Wayfair are undoubtedly benefiting from flexible digital payments, this week’s biggest winners are BNPL service providers. Why now?

The one-two punch of higher prices and rising interest rates appears to be finally taking its toll on many lower- and middle- income households. Some are finding it helpful to choose a BNPL plan that allows purchases to be paid for over time. And since most BNPL ‘financing’ is interest-free (as long as timely payments are made), consumers are embracing it as an affordable alternative to high-interest-rate credit cards. 

With the holiday shopping season yet to get into full swing, BNPL companies have several more weeks to enjoy the short-term financing boom. And in anticipation of strong fourth quarter financial results, forward-thinking investors are paying now in hopes of gaining later on these three BNPL leaders. 

What is a good BNPL pure-play? 

Affirm Holdings, Inc. (NASDAQ: AFRM) gapped up 12% on Monday making it the second best large-mid cap performer after A.I.-powered robotics innovator Symbiotic. The BNPL specialist is the most direct way to invest in the space having the business covered from all angles. Its platform includes commerce solutions for merchants, point-of-sale payment solutions for shoppers, and a consumer-based app. 

Affirm is aiming to disrupt the digital payments market by giving stores and consumers a variety of transaction choices. It teamed up with Amazon to offer Black Friday deals at an annual percentage rate (APR) as low as 0%. Indications are, shoppers jumped at the promotion for both savings and convenience. The Affirm app is connected to thousands of other popular holiday shopping destinations like Target, Walmart, and Best Buy.  

On Tuesday, Affirm received its first upgrade of the year — albeit to a neutral rating, courtesy of Jeffries. Still, it may be a sign that Wall Street is warming up to the BNPL space this winter. 

Is PayPal a BNPL stock?

PayPal Holdings, Inc. (NASDAQ: PYPL) is in the BNPL game through its ‘Pay in 4’ and ‘Pay Monthly’ offerings in the U.S. and U.K. that let shoppers make payments over weeks or months. It is only a small part of the business but one that could play a bigger role if BNPL adoption sticks in 2024. 

It is also becoming a bigger area of focus for the company after it formed a multi-year relationship with KKR that will see the private credit firm purchase European BNPL receivables from PayPal. PayPal also has exposure to BNPL through its acquisition of Paidy, a two-way digital payments platform and BNPL solutions provider.

The consensus price target on PayPal implies more than 30% upside over the next 12 months. Analyst targets could be heading even higher if BNPL traction strengthens.

Is Block a Good way to invest in BNPL?

Early last year, Block, Inc. (NYSE:SQ) made a bold move into the BNPL market with a $29 billion acquisition of Australian-based Afterpay. The Afterpay BNPL platform continues to be integrated into the former Square’s Cash App and Seller products but has yet to be fully embraced by consumers. This may be starting to change however, if Block is able to capitalize on an apparent inflection point in BNPL interest. 

What makes Block an intriguing way to invest in BNPL is Afterpay’s global scope. The platform boasts more than 100,000 merchants and 19 million customers worldwide. This makes Block a good way to gain heavy exposure to the international side of the BNPL market. 

In terms of rating, the Street is currently more bullish on Square than PayPal — but the consensus price target implies less upside (approximately 20%). Still, if BNPL data releases remain strong, expect Block shares to come along for the ride.