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Is Australian Prospa Penny Stock a Good Investment in 2021?

Now is the time to decide which penny stocks you should be buying come next year. Considering the current global economic crisis and uncertainty for the future, you should do quite a bit of research. There are, of course, lists of top penny stocks to watch. But there are also some good options that don’t make these lists. Australian Prospa Group Limited (ASX: PGL) is one of those options. Prospa’s penny stock is rather promising if you look at it right now. But of course, you need to know exactly what it is and what you can expect from the stock price changes in 2021.

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What Is Prospa Group Limited (ASX: PGL) and What Does It Do?

Prospa Group Ltd. is an online lender from Australia. In essence, this isn’t so much a single company as a complex infrastructure of businesses willing to invest in loans. The platform is so effective it’s considered one of the best in Australia. According to a Prospa review for borrowers, the company has been the fastest-growing business in the country in 2018. It has since proven to be a reliable financing provider to hundreds of Australian businesses. This is proven further by its 49.9 out of 5 Trust Score on TrustPilot.

Prospa is a prime example of a fintech startup done right. It has taken off right away and it keeps attracting more investors. The company is dedicated to helping small businesses that need financing but cannot access it due to banks’ stringent requirements.

In essence, Prospa is a financing platform that distributes its investors’ funds to small businesses in the form of loans. That’s why its stock prices are largely dependent on the funding partners that Prospa Group Ltd can attract.

By today Prospa has funded over $1 billion helping multiple businesses and therefore the Australian economy as a whole. This success and exceedingly high customer satisfaction rate are definitely one of the reasons why Prospa managed to make it through the 2020 stock market crash.

Of course, the company and its stocks were negatively affected by the COVID-19 pandemic. In fact, it has become penny stock indeed falling well under $1. However, the situation is changing.

Is Prospa Penny Stock Worth Investing In?

Prospa stock has crashed fast and hard due to the coronavirus pandemic, which caused a drop in profits. And that is what you need to think about when you decide whether it’s worth investing in. The stock value has risen now because Prospa Group has announced the addition of another funding partner to one of its Australian Warehouse Facilities.

Of course, this would have increased the investor’s belief in this penny stock. Its position on the market will continue to strengthen should it add more funding partners. This is a real possibility in the current situation.

According to Prospa’s announcement, the new partner is a global investor that has experience investing in technological solutions. This is another important thing that speaks for Prospa now. Fintech popularity is on the rise like never before. The importance of online lending platforms has also increased. Therefore, 2021 might be the year when online lending platforms are making a fortune.

Yet, as a Prospa stock owner, you need to be aware not only of potential growth but also of issues that this industry might face.

Prospa Stock Is Growing, But Will It Last?

Online lenders like Prospa play an essential part in supporting small businesses during this global crisis. This relevance is one of the main reasons why that stock might be worth investing in.

However, you also need to remember that online lenders are at risk of collapsing if borrowers default on their debts. That risk is huge because online financing platforms often take on those with bad credit and offer unsecured loans. Therefore, as the global economy descends into a depression, their borrowers might fail to pay up.

The majority of small online lenders do not have much in terms of capital. They mostly rely on regular income from loan payments and fast loan turnover. Therefore, if their borrowers do not pay, they won’t have the money to offer more loans. As such, the financing company itself will collapse.

Prospa Group Ltd is facing this kind of threat along with the rest of the online lenders. That’s why you should think hard about whether this penny stock is worth buying.

That said, you also need to remember that some online lending platforms are doing very well in this crisis. It’s because they have the funds to offer loans even despite the drop in revenues. And Prospa is definitely one of these few successful businesses.

In light of this, attracting new funding partners is exactly the thing that a financing platform must do to survive. And considering that interest in these services is growing, those who survive might become the leaders of the revamped financing industry. If the situation plays out this way, your penny Prospa stock might bring you a fortune down the line. This is another thing you need to think about when you are thinking about whether to buy it for 2021. Especially now when the stock is still available for a very low price.

In Conclusion: Choose Penny Stocks to Buy in 2021 with Care

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Choosing which penny stocks to buy in 2021 is a difficult task, no doubt about that. There are seemingly safe bets like robotics because that sector has been growing steadily. But there is also the risk of the stock market crash again. So, in the end, no matter where you look it all seems uncertain.

This is definitely why penny stocks are a good choice as you can minimize your losses with them in case of a crash. But still, you want to make sure you lose as little as possible.

In this regard, Prospa stock looks good with its positive dynamic. However, there is also an inherent weakness to it as all online lenders are struggling now to some extent. So, be sure to consider all the available information and don’t rush in your decisions. Think hard and remember that a diverse portfolio is the safest.