Why the Afterpay and Zip share prices are closely watched today

Posted: 28 May 2021 1:04 pm

Shares in BNPL providers Afterpay and Zip Co have lost 16%-20% of their value in the last month.

Buy now pay later providers Afterpay (ASX: APT) and Zip Co Ltd (ASX: Z1P) are among the top traded ASX shares on most days, but investors are paying especially close attention to the two stocks today. At the time of writing, Afterpay was up 0.4% at $94.45 while Zip Co was up 0.6% at $7.25.

Why Afterpay and Zip stock prices are in the spotlight

Buy now pay later provider Klarna, a key rival for Afterpay and Zip in the European market, is believed to be closing in on new funding that would value the company at US$40 billion, according to a media report overnight.

The investment is being backed by SoftBank and several other investors, and comes ahead of a potential stock market listing by Klarna, the CNBC report said.

To put the news into context, Afterpay’s current market capitalisation stands at $27 billion while Zip Co has a market value of $4 billion.

Sweden-based Klarna, in which local heavyweight Commonwealth Bank (ASX: CBA) owns a 5.5% stake, is already one of Europe’s most valuable fintech companies.

It has steadily grown in the Europe market, and also expanded into the US market on the back of a surge in online shopping due to coronavirus lockdowns around the world. Klarna hit $1 billion in annual revenue last year.

Rising competition

The news of Klarna’s new funding comes just days after Zip Co announced it is raising stakes to take control of UAE-based Spotii Holdings and Europe-focused Twisto Payments. The Australian fintech provider boosted its international footprint last year with the acquisition of US-based QuadPay for $403 million.

Analysts are worried that market leader Afterpay is now staring at rising competition in the BNPL market as more players look to take advantage of strong economic recovery.

In addition, financial industry heavyweights such as global leader PayPal and CBA have also announced their own BNPL segment plans.

Analysts at Macquarie recently said in a report that 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.

Those concerns have meant that Zip shares have so far lost 16% of their value in the last month, while Afterpay shares are down 23% in the same period.

Considering investing in Afterpay or Zip Co shares?

If you are keen to buy shares in Afterpay or Zip, 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.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available for Australian investors.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

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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