Why is the Afterpay (APT) share price still going downhill today?

Posted: 7 May 2021 12:55 pm

Shares in BNPL leader Afterpay have continued to slide since mid-April.

Buy now pay later darling Afterpay (ASX: APT) is suddenly finding that the stock market is a tough place. Afterpay shares were down 5.9% to $93.60 in early trading on Friday and have now lost nearly 20% in the past week alone.

Why the Afterpay stock price is sliding

Afterpay shares have been on a downward journey since mid-April, roughly around the time it posted its third quarter trading update.

It had rushed past the psychological $100 barrier in December, but is now back at the levels it was trading at in November 2020.

Investors seem to be mainly spooked by concerns about rising interest rates. This week, those worries were triggered when US Treasury Secretary Janet Yellen hinted that interest rates may have to rise to stop the US economy overheating.

The US is a key market for Afterpay, but of course any change in US rates would eventually prompt interest rate increases worldwide, including possibly Australia.

Co-founder Anthony Eisen has tried to shrug off investors' fears but it has made little difference.

“If interest rates rise, that’s when our model becomes a competitive advantage. Even if interest rates doubled or tripled from this point, it wouldn’t be pervasive to our margin equation,” he said at the Macquarie Australia conference this week.

But when your stock has zoomed 150% in the last year, the market will get jittery.

Rising competition

Meanwhile, analysts are worried that Afterpay is staring at rising competition in the buy now pay later market as more players look to take advantage of its growth.

In addition, financial industry heavyweights such as global leader PayPal and Australia’s Commonwealth Bank (ASX: CBA) have also announced their entry into the BNPL segment.

Analysts at Macquarie think there is likely to be industry overcapacity in the near term, which will be followed by a few years of pain for all players in the market.

Morningstar estimates Afterpay’s fair value at just $75 a share and has assigned a "very high uncertainty” rating to the stock.

Those concerns are underlined by the decline in share prices of smaller rivals Zip (ASX:Z1P) and Sezzle (ASX:SZL) which are down nearly 50% and 35% from their February peaks.

Considering buying Afterpay shares?

If you are keen to buy Afterpay shares, you should consider investing through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some trading platforms offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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