The Afterpay Ltd (ASX: APT) share price fell in early trade but that was always to be expected in the wake of its capital raise, although that isn’t the only thing pressuring the market darling.
The buy-now, pay-later (BNPL) superstar fell 1.7% to $66.87 as it emerged from its trading halt after launching an $800 million capital raise yesterday.
Stocks normally trade lower in the aftermath of such news as new shares are sold at a discount to the last traded price. Even gravity defying Afterpay is no exception.
Uncertainties piling up
But the stock is facing another headwind as Macquarie Group Ltd (ASX: MQG) downgraded the stock to “neutral” from “outperform” today.
While the broker was impressed with the group’s accelerating sales momentum and customer sign-ups in key markets, these weren’t enough to keep recommending Afterpay as a buy.
“Afterpay’s execution is strong across all three key markets. The acceleration in growth during the current half bodes well for momentum in the years ahead, and for entry into new markets,” said Macquarie.
However, there are a number of uncertainties facing the stock and given its stellar share price run, the broker thought it prudent to pare its enthusiasm on the tech darling.
Macquarie’s 12-month price target on Afterpay is $70 a share.
Running out of fizz
The popular beverages group dipped 0.2% to $8.74, which isn’t too bad considering that Credit Suisse chopped its rating to “neutral” from “outperform”.
Perhaps perceptions of the group’s relatively defensive characteristics is keeping Coca-Cola Amatil in good stead with investors as the COVID-19 pandemic rears its ugly head again.
But this is precisely why Credit Suisse downgraded the stock. The second lockdown of large parts of Victoria to combat a second wave of coronavirus infections is a negative for sales.
Around half of beverage sales under the group are sold at restaurants, cafes and other leisure businesses. These businesses will be forced to close for six weeks from tomorrow and the broker estimates that Victoria accounts for around a fifth of national beverage consumption.
The Victorian shutdown will likely exacerbate another negative trend that Credit Suisse observed in the last few months.
“Early signs of consumers seeking value in the beverage category are emerging as we lap the container deposit schemes and contend with the pandemic’s economic effects,” said the broker.
“Discount water volume has started to grow above category rates again. Our data is lagged (March) and the trend is apparent for but a few months.”
Credit Suisse’s price target on the stock is $9 a share.
Getting too rich
Meanwhile, the Magellan Financial Group Ltd (ASX: MFG) share price is also under pressure this morning.
Shares in the international fund manager fell 1.6% to $62.99 at the time of writing after Citigroup downgraded its call on the stock to “neutral” from buy”.
Just like Afterpay, the Magellan share price is a strong performer and there’s lots to like in the stock. But Magellan may have run too high too fast.
“We remain attracted to MFG’s positive leverage to equity markets, solid investment performance and strong net cash,” said Citi.
“But following share price rise of ~90% since late March and a FY21E PE of ~26x currently, we see the risk reward as less compelling.”
However, the broker did lift its earnings forecast for the group to reflect the strong rally in global equities and the group’s ability to collect more performance fees for the strong returns.
This pushes Citi’s share price target on the group to $66 from $40 a share.
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Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.
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