BNPL? Try sell now, buy later! Laybuy (ASX:LBY) share price tipped to crash 70%

This is the biggest downgrade we've seen in a long while.

| More on:
A man wearing glasses and a checkered shirt looks gobsmacked as he puts his hand to his cheek, representing the fall of the Zip share price is cheek

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Laybuy share price has faltered over the last 3 months 
  • Shares are now trading at record lows since the company first listed back in September 2020
  • Bell Potter has slashed its rating and valuation on the company by 72% to just 24 cents per share 

The Laybuy Group Holdings Ltd (ASX: LBY) share price continued its steep descent into negative territory today.

The buy now, pay later (BNPL) services provider closed the day down 5.13% with its shares trading at 18.5 cents each.

It seems weakness across tech-weighted indices and high-beta names in the S&P/ASX 200 Small Ordinaries index (ASX: XSO) have impacted Laybuy's share price these last few months.

The drawdown hasn't gone unnoticed either. In a note to clients today, analysts from Australian brokerage Bell Potter have slashed their recommendation on the company to hold from buy.

Let's take a closer look.

Bell Potter tips Laybuy share price to plunge 72%

Following Laybuy's third-quarter trading update last week, Bell Potter analyst James Filius has made some updates to the broker's modelling for the company.

Laybuy didn't provide any specific guidance in its quarterly update, only that it has optimistic expectations of landing in the "top 3 BNPL providers in the large UK retail market".

Despite this, Filius cut customer growth estimates on Laybuy from FY22 onwards, restructuring earnings forecasts in the process.

For instance, the BNPL player recognised just 5% customer growth for this recent quarter, well short of the broker's internal estimates.

This prompted Bell Potter to reduce its forecasts on customer growth by 20% for FY22. In turn, this has resulted in a corresponding 6% haircut to revenue growth expectations.

As it goes in financial modelling, the downstep in sales and customer growth estimates has flow-on effects. Bell Potter has also lowered its earnings per share (EPS) estimates for the coming 3 years.

It's lowered FY22, FY23 and FY24 EPS estimates for Laybuy by 23%, 10% and 2% respectively.

Perhaps the most scathing outcome from Bell Potter's ratings downgrade today was the adjustment to its valuation on the company.

The broker now values Laybuy at just 24 cents a share after slashing its price target by 72%. That drop is parallel to losses seen by the company, and also the wider industry, over the last 12 months.

From another perspective, Canadian broker Canaccord Genuity rates Laybuy as a 'speculative buy' at an 85 cent valuation. However, it should be noted this rating was provided on 1 December 2021, well before the company's Q3 FY22 trading update last week.

Laybuy share price snapshot

In the last 12 months, the Laybuy share price has collapsed almost 87% and trails the benchmark index substantially over that time.

This year, things aren't any better with the company's shares down 21% since January 1.

That gives Laybuy a market capitalisation of $47 million.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

A female stockbroker reviews share price performance in her office with the city shown in the background through her windows
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Miner looking at a tablet.
Broker Notes

Should you buy the dip on South32 shares?

Could the sell-off be a buying opportunity?

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Broker Notes

Why did this top broker just downgrade DroneShield shares?

The broker believes its shares are fully valued at current levels.

Read more »

A female Woolworths customer leans on her shopping trolley as she rests her chin in her hand thinking about what to buy for dinner while also wondering why the Woolworths share price isn't doing as well as Coles recently
Broker Notes

Woolworths shares 'less placed' says top broker

Could the supermarket giant's share price be under pressure?

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Woman with speaker
Broker Notes

'Oversold': 2 ASX 200 shares to buy at attractive levels right now

These companies look attractive after being sharply sold, analysts say.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

These ASX shares could rise ~20% to 40%

Analysts believe these shares could generate big returns for investors.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »