Afterpay Touch Group Ltd’s (ASX: APT) is a tech-savvy ‘buy now, pay later’ payment company that provides on-demand credit to their growing active customer base of 4.3 million with thousands of retail merchants.
Currently, Afterpay’s shares are priced at A$31.95 this still represents a 142% increase over the past year. As a key headline player in the ‘buy now, pay later’ business model and their substantial share price growth regardless of the recent share drop, a broker’s stirring report on the potential regulatory scrutiny has concerned investors across the industry.
What Caused the Share Price Fall?
Despite the prevailing market sentiment, analysts from investment bank UBS recently released a note that gave Afterpay a ‘Sell’ rating which worried investors. UBS suggested that the risk of regulatory scrutiny would halve Afterpay’s share price down to A$17.25, this represents a 54% decrease in the share price.
As a result, investors across this business are adjusting their expectations of Afterpay’s share value and pricing in the risks of regulatory scrutiny that may affect Afterpay. Other competitors were caught in the crossfire since yesterday’s close, FlexiGroup Ltd and Zip Co Ltd’s share prices are down by 3.2% and 3.8% respectively.
How Will Afterpay Perform in the Future?
Despite the share price fall, the ‘buy now, pay later’ businesses model remain to be very popular among many consumers who require on-demand credit. Several dissenters have dismissed the UBS note as overly bearish.
On the other hand, several reports have made parallels between Afterpay and Uber. Where Afterpay and the industry may be heading towards regulatory uncertainties with fierce competition on top, is a recipe concentration on being the ‘last man standing’ and maintaining market share on thin margins.
As of 1:12 PM AEST 17/10/19, Afterpay Touch Group Ltd’s share prices (ASX: APT) have fallen to A$31.95. Compared to their highest A$36.56 close, this represents a 12.59% decrease in share prices over the past 5 days. Although, over the past twelve months this represents a 142% increase regardless of the bearish report published by UBS.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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