The Motley Fool

Why the Afterpay share price declined 7% today

In one of Afterpay Touch Group Ltd’s (ASX: APT) most painful trading days, the Afterpay share price fell by 7% today.

Of course, that should be taken in context, the Afterpay share price is still up 7.4% over the past month alone.

The cause of today’s dunk was a note out of UBS saying that the Afterpay share price could halve over the next year to $17.25. We haven’t seen that share price since the start of the year.

The analysts at the investment bank are concerned about increased regulatory oversight and less growth in the United States than the current share price is suggesting.

The US is a much bigger market than Australia, so it’s far more important to the Afterpay investment case that the buy now, pay later company wins a good market share over there.

But Afterpay is not the only business growing strongly. Zip Co Ltd (ASX: Z1P) is doing well domestically and has made acquisitions to expand overseas. Plus there’s plenty of others like Splitit Ltd (ASX: SPT), Sezzle Inc (ASX: INC) and FlexiGroup Limited (ASX: FXL) also wanting a piece of Afterpay’s BNPL pie.

UBS thinks Afterpay will suffer from its own success and that competition could dampen its chances of becoming a global powerhouse.

Foolish takeaway

Whilst Afterpay’s customer numbers, merchant numbers and underlying sales are growing strongly, I’m left wondering whether Afterpay will be able to deliver strong profitable growth in the coming years. If gross margins start shrinking it could mean Afterpay doesn’t generate the expected profits in the coming years.

Afterpay has an exciting future, but I think I’d rather buy these hot growth shares instead.

Five Growth Shares That Should Probably Be In Your Portfolio

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has recommended FlexiGroup Limited and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!