The S&P/ASX 200 Index (ASX: XJO) is kicking off the last trading day of the week today on a positive note. At the time of writing, the ASX 200 is up a healthy 0.62% to 7,473 points. But this rising tide isn't lifting all boats this Friday. A few ASX tech shares are proving to be a drag on the broader markets today. Let's check out what's going on.
Even though the ASX 200 is comfortably in positive territory so far today, a couple of prominent ASX tech shares are struggling and dragging down the broader market.
The Xero Limited (ASX: XRO) share price is one. It's currently down 0.47% at $152.96 a share. But Afterpay Ltd (ASX: APT) shares are among the worst-performing ASX 200 shares today, with a nasty 3.2% drop thus far to $120.40 a share.
Of course, with an ASX 200 weighting of 1.46% for Afterpay and just 0.94% for Xero, these two companies' fortunes don't affect the ASX 200 too much. After all, if the big four banks have a good day, that's usually enough for the ASX 200 to follow suit. Afterpay and Xero be damned.
But let's dive into why these two companies are suffering today regardless.
Xero and Afterpay shares weigh on ASX 200
In Afterpay's case, the answer is probably relatively simple. Ever since Afterpay agreed to be acquired by the US payments giant Square Inc (NYSE: SQ) back in August, this company's fortunes have been tied to the Square share price.
That's because Square put up an all-scrip deal. This will see existing Afterpay shareholders receive 0.375 shares of Square for every Afterpay share held. And we saw the Square share price take a bit of a hit overnight (our time) on the US markets.
Square shares fell 1.99% last night to US$247.46 a share. In after-hours trading, the drop was even steeper, with Square losing 3.03% at US$239.96 a share. So it's perhaps no surprise the Afterpay share price is also taking a hit today, given the intertwined relationship the two companies' share prices now have.
But in the case of Xero, the answer is less clear on why it's having a bad hair day this Friday. There is no news or announcements out of the company today. However, one possible explanation is some expert investor opinions. As my Fool colleague Tristan covered earlier this week, one broker isn't too bullish on Xero right now.
Brokers at Macquarie Group Ltd (ASX: MQG) have recently rated Xero as a 'sell', with a 12-month share price target of $130. That implies a potential downside of almost 15% over the next 12 months. Macquarie reckons Xero is facing some fierce competition from its US competitor Intuit Inc (NASDAQ: INTU), which has been accentuated by Intuit's recent acquisition of Mailchimp.
So the ASX 200 looks like it will finish up the week on a positive note. But even so, it would have been even better without Xero and Afterpay shares weighing it down this Friday.
