Thursday, July 16, 2020

ASX News: Afterpay (ASX:APT) shares now treading water

After a week of wild movements, the Afterpay share price has suddenly stabilisedThe volume of Afterpay shares traded has dramatically dropped since last week Investors are frozen by uncertainty both in the wider market and Afterpay’s businessAs millennials lock themselves at home, the question remains whether consumers will stop buying or use Afterpay in droves for online shoppingWhile the whole buy now, pay later sector faces similar challenges, Afterpay is at the forefront of the battleShares in Afterpay closed today worth $20.66 each — their highest price since mid-March

After seven sessions of wild movements, the Afterpay (APT) share price has plateaued since last Thursday despite big swings in the wider market.

From March 17 to March 26, there wasn’t a day when the Afterpay share price didn’t shift by less than 22 per cent. It seems whatever the market did, Afterpay exaggerated.

Over the past four sessions, however, Afterpay shares have moved a total of just 6.44 per cent despite some of the biggest percentage changes on the ASX 200 index in recent history.

Is this the end of the Afterpay volatility? Or is the buy now, pay later darling simply taking a breather until a fresh round of tossing and turning?

Frozen by uncertainty

It seems a key reason for the sudden marginal share price movements — as one might expect — is a far lower volume of shares traded.

Over the incredibly volatile period from March 17 to March 26, the average volume of APT shares traded was 15.14 million each day, with a peak of 19.17 million on March 20 and a low of 11.2 million on March 17.

On Monday, however, just 7.37 million shares were traded. Yesterday, 8.43 million shares were traded. Today, Afterpay’s volume was 7.55 million.

So, it’s clear punters are taking a seat and keeping their hands off Afterpay shares for now.

Will shoppers pay now, or buy later?

This lowered volume can, in turn, be attributed to uncertainty both in the near future of discretionary products and the future of Afterpay.

As the world turns to isolation and quarantine to stem the spread of COVID-19, brick-and-mortar retailers are shutting their doors on their empty stores.

Big names like Lovisa, Myer, and Vita Group have had to temporarily close shop to maintain the health of employees, customers, and balance sheets.

Of course, shoppers can still buy goods from these stores through their online services.

As such, investors and analysts just don’t know how exactly this will affect Afterpay’s business.

On the one hand, the closure of so many key discretionary stores means Afterpay could see a huge decline in people using its service. On the other hand, the switch to online shopping could mean consumers use buy now, pay later services in record numbers.

Similarly, the number of millennials — Afterpay’s key market — losing their jobs could result in increased defaults and non-payments. Or alternatively, the homebound millennials could turn to payment instalments so they can keep buying but without the need to fork out big sums of cash in one hit.

This uncertainty is reflected in the lower Afterpay trading volumes as nobody knows just yet which way the pendulum will swing.

Analysts weighing in

Further fuelling the uncertainty is the price target many analysts are putting on Afterpay.

While Citibank and Morgan Stanley chimed in last week with a $21.10 and $46.50 price target, respectively, analysts surveyed by the Wall Street Journal have taken a middle ground.

Of the 13 analysts surveyed, eight rated Afterpay a “buy”, four a “hold”, and just one an “underweight”. Further, the average Afterpay price target among these analysts as of Wednesday, April 1 is $31.33.

As such, the juxtaposition of analysts sentiment against market fear is keeping hands off wallets.

Afterpay leading the posse

Though Afterpay is certainly the poster-boy for the buy now, pay later sector, it’s not the only kid on the block.

Right now, it seems the rest of the ASX-listed fintech darlings are facing the same challenges as Afterpay, but simply on a smaller scale.

Here’s a comparison of the share price movements of Afterpay, Zip Co, Sezzle, and Splitit from March 13 to April 1:

Share price comparison from March 13 to April 1 for APT, SPT, Z1P, and SZL.

The trend across the fintech darlings has been similar, but it’s clear at this point in time investors in Afterpay have the most to lose — and the most to gain.

While the share price is steady, punters can use this moment’s respite to make the decision: will they buy now, or pay later?

After a week of wild movements, the Afterpay share price has suddenly stabilisedThe volume of Afterpay shares traded has dramatically dropped since last week Investors are frozen by uncertainty both in the wider market and Afterpay’s businessAs millennials lock themselves at home, the question remains whether consumers will stop buying or use Afterpay in droves for online shoppingWhile the whole buy now, pay later sector faces similar challenges, Afterpay is at the forefront of the battleShares in Afterpay closed today worth $20.66 each — their highest price since mid-March

After seven sessions of wild movements, the Afterpay (APT) share price has plateaued since last Thursday despite big swings in the wider market.

From March 17 to March 26, there wasn’t a day when the Afterpay share price didn’t shift by less than 22 per cent. It seems whatever the market did, Afterpay exaggerated.

Over the past four sessions, however, Afterpay shares have moved a total of just 6.44 per cent despite some of the biggest percentage changes on the ASX 200 index in recent history.

Is this the end of the Afterpay volatility? Or is the buy now, pay later darling simply taking a breather until a fresh round of tossing and turning?

Frozen by uncertainty

It seems a key reason for the sudden marginal share price movements — as one might expect — is a far lower volume of shares traded.

Over the incredibly volatile period from March 17 to March 26, the average volume of APT shares traded was 15.14 million each day, with a peak of 19.17 million on March 20 and a low of 11.2 million on March 17.

On Monday, however, just 7.37 million shares were traded. Yesterday, 8.43 million shares were traded. Today, Afterpay’s volume was 7.55 million.

So, it’s clear punters are taking a seat and keeping their hands off Afterpay shares for now.

Will shoppers pay now, or buy later?

This lowered volume can, in turn, be attributed to uncertainty both in the near future of discretionary products and the future of Afterpay.

As the world turns to isolation and quarantine to stem the spread of COVID-19, brick-and-mortar retailers are shutting their doors on their empty stores.

Big names like Lovisa, Myer, and Vita Group have had to temporarily close shop to maintain the health of employees, customers, and balance sheets.

Of course, shoppers can still buy goods from these stores through their online services.

As such, investors and analysts just don’t know how exactly this will affect Afterpay’s business.

On the one hand, the closure of so many key discretionary stores means Afterpay could see a huge decline in people using its service. On the other hand, the switch to online shopping could mean consumers use buy now, pay later services in record numbers.

Similarly, the number of millennials — Afterpay’s key market — losing their jobs could result in increased defaults and non-payments. Or alternatively, the homebound millennials could turn to payment instalments so they can keep buying but without the need to fork out big sums of cash in one hit.

This uncertainty is reflected in the lower Afterpay trading volumes as nobody knows just yet which way the pendulum will swing.

Analysts weighing in

Further fuelling the uncertainty is the price target many analysts are putting on Afterpay.

While Citibank and Morgan Stanley chimed in last week with a $21.10 and $46.50 price target, respectively, analysts surveyed by the Wall Street Journal have taken a middle ground.

Of the 13 analysts surveyed, eight rated Afterpay a “buy”, four a “hold”, and just one an “underweight”. Further, the average Afterpay price target among these analysts as of Wednesday, April 1 is $31.33.

As such, the juxtaposition of analysts sentiment against market fear is keeping hands off wallets.

Afterpay leading the posse

Though Afterpay is certainly the poster-boy for the buy now, pay later sector, it’s not the only kid on the block.

Right now, it seems the rest of the ASX-listed fintech darlings are facing the same challenges as Afterpay, but simply on a smaller scale.

Here’s a comparison of the share price movements of Afterpay, Zip Co, Sezzle, and Splitit from March 13 to April 1:

Share price comparison from March 13 to April 1 for APT, SPT, Z1P, and SZL.

The trend across the fintech darlings has been similar, but it’s clear at this point in time investors in Afterpay have the most to lose — and the most to gain.

While the share price is steady, punters can use this moment’s respite to make the decision: will they buy now, or pay later?

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