More attention was just put on the Afterpay Ltd (ASX: APT) share price by one of the most followed brokers, Macquarie Group Ltd (ASX: MQG).
What happened to the Afterpay share price?
Macquarie has a broad range of services, and offering recommendations and opinions about ASX shares is one of those.
It’s offered up some thoughts on Afterpay, one of the world’s leading buy now, pay later (BNPL) operators.
As reported by the AFR, Macquarie has become less optimistic about the Afterpay share price, reducing its price target from $140 to $120.
A price target is where a broker thinks that the share price will be in 12 months from. And that’s just the broker’s best guess. It certainly isn’t saying that the share price should trade at $120 tomorrow.
Macquarie acknowledged that Afterpay has grown significantly over the last few years, but it’s expecting growth to slow down in the future. The broker also said that the sector has a grim outlook in the short term.
However, after a period of disruption, there could be a possible future where Afterpay keeps getting stronger whilst weaker competitors are pushed to the side.
The broker thinks that the BNPL sector won’t trade at as a high valuation as it has before. We’ve already seen that in recent weeks as the Afterpay share price has declined by 32% since 10 February 2021.
Even so, Macquarie has a “neutral” rating on the business, meaning that it’s not a buy or a sell according to the broker.
How did the Afterpay share price respond?
On Wednesday, the Afterpay share price actually went up by 0.3%. That’s not too surprising considering the price target is actually 11.6% higher than it is now.
I really don’t know where Afterpay shares are going to go next. There’s rising competition from the likes of Commonwealth Bank of Australia (ASX: CBA), Zip Co Ltd (ASX: Z1P), Sezzle Inc (ASX: SZL) and Klarna. I can’t imagine all of them are going to remain as profitable when it comes to the marign as they are now. And cheaper merchants could try to steal market share in the future. To me, Afterpay shares are valued very highly – success is not as clear cut to me.
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