Why ASX BNPL shares like Afterpay, Zip, and Sezzle are sinking

There are likely a couple of reasons ASX-listed BNPL shares are taking a tumble today.

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It’s a rough day on the market for investors in ASX BNPL (buy now, pay later) companies like Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P), and Sezzle Inc (ASX: SZL).

At the time of writing, shares in these companies are down a whopping 9.46%, 9.38%, and 9.24% respectively.

While there are many reasons why these share prices are moving – among them the reported entering of Apple Inc (NASDAQ: AAPL) into the BNPL sector, another factor may be the sharp rise in inflation in the US.

Historically, perceptions of rising inflation have been damaging to growth stocks like Afterpay and Zip.

Let’s take a closer look.

ASX tech down as US inflation up

It’s not just BNPL shares that are suffering today. Despite a rising S&P/ASX 200 Index (ASX: XJO) – up 0.44% – the S&P/ASX All Technologies Index (ASX: XTX) is down 1.32%. It follows on from a fall in the tech-heavy Nasdaq Composite overnight.

Motley Fool Australia’s own chief investment officer Scott Phillips says that the performance of American stocks and Australian shares usually correlate.

“I think it’s common for the ASX to follow US markets, almost slavishly,” he previously told this reporter.

“The old saying is ‘when America sneezes, Australia catches a cold’”.

The previously mentioned inverse relationship between inflation and growth stocks could be behind the fall in the Nasdaq, along with the news of Apple’s entry into the market.

Reuters is reporting last month’s inflation of 0.9% – the largest in 13 years – is greater than economist expectations of 0.5%. Despite a 5.4% rise in annual CPI, most experts quoted by Reuters say the figures are probably one-off.

“June’s CPI numbers looked scary but, once again, we see that it was mainly temporary price increases that pumped up the figures,” economist Robert Frick told the publication.

Despite those reassurances from experts, investors may be worried by the spectre of inflation. That’s judging by the massive falls in the Afterpay, Zip, and Sezzle share prices.

ASX BNPL share price snapshots

This isn’t the first time a sell-off possibly linked to inflation has hit the Afterpay share price. In May, shares in the ASX BNPL provider fell 5% on inflation fears. Sezzle and Zip shares have also faced similarly bad days. These companies often tend to move in tandem with one another.

Despite a red day for these companies, it’s been a green year. Over the past 12 months, Afterpay, Zip, and Sezzle shares have increased 61%, 5.7%, and 7.1% respectively.

The 52-week highs of these companies are $160.05, $14.53, and $11.99.

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Returns as of 15th February 2021

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Apple, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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