The Afterpay (ASX:APT) share price is sinking

The Afterpay Ltd (ASX:APT) share price has dropped around 9% in a really rough day for the buy now, pay later sector. 

You’re reading a free article on Rask. Join 4,000+ Australians who get our expert advice, tools, exclusive research and investment recommendations. Get your 30-day trial for $1! Learn more

The Afterpay Ltd (ASX: APT) share price has dropped around 9% in a really rough day for the buy now, pay later sector.

What’s going on with the Afterpay share price?

It’s not just Afterpay shares that have suffered today.

There has actually been a widespread decline. The Zip Co Ltd (ASX: Z1P) share price also fell almost 9%. The Openpay Group Ltd (ASX: OPY) share price dropped around 8%. Sezzle Inc (ASX: SZL) suffered a share price selloff of over 6%, the Laybuy Holdings Ltd (ASX: LBY) share price went down around 5% and the Ioupay Ltd (ASX: IOU) share price plunged 12.5%.

But before you start thinking that the market has suddenly been turned off buy now, pay later, many high flying growth shares have seen a big decline.

The Nearmap Ltd (ASX: NEA) share price declined 7.7%, the Redbubble Ltd (ASX: RBL) share price declined 7.6% and the Pointsbet Holdings Ltd (ASX: PBH) share price fell 7%.

So, what does this mean for the Afterpay share price?

I don’t think the underlying value of Afterpay is almost 10% less than it was yesterday. Although I’m not sure the intrinsic value of Afterpay is as high as $100 or even $90 at this point.

The problem for me is that Afterpay is not yet making a profit. Businesses can be worth investing in if they’re not making a profit, but competition is rising in the BNPL space and there is growing commentary that merchants should be allowed to pass on costs to customers.

Rising interest rates could also be a problem in a year or two. Not only can that affect the valuation, but earnings might be affected if the interest expense rises significantly.

Summary thoughts

Over the long term, I can’t see regulators, merchants and competition all letting Afterpay maintain the margins that it is without some sort of change.

In my mind, there are other ASX growth shares that make more sense at the current valuation, particularly at today’s lower prices.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

A $50,000 per year passive income special report

Join more 50,000 Australian investors who read our weekly investing newsletter and we’ll send you our passive income investing report right now.

How can Rask help you?

About Rask

Learn more about us, our your community and our mission.

Rask investing philosophy

Nearly 15 years later.
It's still a work in progress.

Online investment community

You won't find our investment community on Facebook or Reddit because it's secure, free and available now.

Join 250,000+ podcast listeners

250,000 investors tune into the Rask podcasts every month. Find out why.

Find a financial planner

Australia's financial experts. At your doorstep.

Free finance courses

35,000 students have enrolled in free Rask courses. We're on a mission to 100,000.

Subscribe to Rask's free investor newsletter

53,000 Australian investors subscribe to our Sunday newsletter... and love it! It's free.

$50 million invested

We manage almost $50 million on behalf of Aussies. Discover how you can invest with us.

Better investing starts here.

Want to level-up your analytical skills and investing insights but don’t know where to start? Join 50,000 Australian investors on our mailing list and we’ll send you our favourite podcasts, courses, resources and investment articles every Sunday morning. Grab a coffee and let Owen and the team bring you the best  insights.

Subscribe to Rask's free investor newsletter

Kick off your week with our pick of podcasts, courses and investing resources to keep your finger on the Rask pulse!

Here you go: A $50,000 per year passive income special report

Join more 50,000 Australian investors who read our weekly investing newsletter and we’ll send you our passive income investing report right now.

Simply enter your email address and we’ll send it to you. No tricks. Unsubscribe anytime.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.