The Afterpay Ltd (ASX: APT) share price has come under significant pressure on Wednesday and is the worst performer on the S&P/ASX 200 Index (ASX: XJO).
In early afternoon trade the payments company's shares are down 32% to a 52-week low of $13.00.
Why is the Afterpay share price down 32%?
Investors have been selling off the shares of Afterpay and rival Zip Co Ltd (ASX: Z1P) today despite there being no news out of either company.
However, there are a number of coronavirus-related develoments that could be weighing on their shares.
The first is of course the impact that the spread of the coronavirus across the globe is having on the retail sector.
We have seen shopping centres across the world close their doors, bars and restaurants ordered to shut or restrict their offering to delivery or pick up, and social and sporting events cancelled.
Whilst both Afterpay and Zip Co have a strong presence online and generate the majority of their sales from this channel, it is worth remembering that many of its users are part of the millennial demographic and could be working in affected businesses.
According to data from ASIC in 2018, 60% of buy now pay later users were aged 18 to 34 and two in five were earning under $40,000. Its research also showed that 40% of those users were students or worked part time.
Whilst this data is a touch outdated, I don't believe things will have changed too dramatically in the industry.
This could be a problem for Afterpay and its peers, as many part time workers (and full timers also) face an uncertain few months due to the coronavirus.
Whether you work in a Lovisa Holdings Ltd (ASX: LOV) shop, fry chicken for KFC restaurant operator Collins Foods Ltd (ASX: CKF), or are part of the cabin crew of Qantas Airways Limited (ASX: QAN), there's a real possibility that you may not be getting the same hours you were just a few weeks ago.
This could put a big dent in spending through the Afterpay and Zip Co platforms and, if things get worse, could cause a spike in bad debts.
Foolish Takeaway.
I'm optimistic that it won't get to that and feel confident that both Afterpay and Zip Co have bright futures and that their shares will be trading notably higher than where they are today in two years' time.
And when the market volatility eases, today's selloff could prove to be a real buying opportunity. Though, given the risks involved, it might be best restricting any investment to just a small part of your portfolio.
