The Afterpay Ltd (ASX: APT) share price continues to slide, down 5.82% at the time of writing to $100.73. Its shares have lost almost 15% in value in this week alone and are back to December 2020 levels.
Why is the Afterpay share price getting hammered?
Afterpay has not made any significant market sensitive announcements since its third-quarter trading update on 20 April. But upon closer inspection, it's only been downhill for the Afterpay share price since its quarterly update.
Its shares managed to stage a 25% rally. Furthermore, bringing shares from the $100 level in late March to a high of $128. This price was obtained on the day of the third-quarter announcement. Since then, shares have gone full circle, losing 20% in value in just 13 trading sessions. This has sent the Afterpay share price right back to $100.
Afterpay's results could be something to blame. However, the broader buy now pay later (BNPL) sector has come under heavy selling pressure recently.
Large cap BNPL shares such as Afterpay, Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX: SZL) have been able to hold up relatively well year-to-date. While smaller players such as Laybuy Group Holdings Ltd (ASX: LBY) and Openpay Group Ltd (ASX: OPY) have more than halved in value in the last 6–12 months.
Broker comments
Macquarie might be saying "I told you so" after its report in March which highlighted a bleak outlook for the BNPL industry. The report anticipates a "pain before gain" scenario saying that:
The BNPL industry has seen explosive growth in the past few years and quickly gained popularity as a payment alternative, but as with many other such trends experienced in the past (China Commodities in 2015, China Autos in 2018), we think an excessive number of participants has entered the industry in the near term resulting in industry overcapacity.
We expect this to be followed by a few years of industry consolidation (i.e. pain for all players) before industry normalisation at a healthier supply/demand equilibrium.
To add further insult to injury, US-listed BNPL giant, Affirm Holdings Inc (NASDAQ: AFRM) took a 7.35% dive overnight. This brought the company to an all-time record low of $57.60. Its shares were fetching around $70 for most of April and hit a peak of $146.90 on 10 February.
