The Afterpay Ltd (ASX: APT) share price is trading lower again on Thursday morning. At the time of writing, the payments company’s shares are down almost 2.5% to $110.42.
This means the Afterpay share price is now down over 7% since the start of the year.
Why is the Afterpay share price down 7% in 2021?
Investors have been selling Afterpay’s shares for a number of reasons in 2021. One is profit taking after some outrageous gains over the last 12 months. Another reason has been rising bond yields, which have put pressure on the tech sector.
In addition to this, concerns over increasing competition appears to have been weighing on the company’s shares. This follows the launch of BNPL services by PayPal, Shopify, and even Commonwealth Bank of Australia (ASX: CBA) this week. You can read more about the latter here.
Should Afterpay shareholders be concerned by increasing competition?
Goldman Sachs has been looking into the BNPL sector. It believes that further growth lies ahead for the sector thanks to a number of structural drivers. The broker also feels that Afterpay is well-placed to overcome the increasing competition.
It commented: “Declining popularity of credit cards and rising use of debit cards are likely to remain structural drivers. As a transaction-driven business model it is necessary for BNPL providers to scale with merchants and consumers to generate sustainable network effects.”
“This is why we believe relatively few players will dominate this sector in each market and flag that APT is showing the operational signs of being one of the key winners in this space (strong customer growth, merchant pipeline and frequency of use trends). Competition will likely be fierce but the market growth opportunity is substantial and unlikely to prevent APT from achieving our customer and Gross Merchandise Value forecasts.”
Where next for the Afterpay share price?
While Goldman Sachs’ analysts believe the Afterpay share price can still go higher from here, it isn’t enough for the broker to put a buy rating on its shares.
Its analysts have retained their neutral rating and $127.60 price target. This implies potential upside of 15.5%
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More reading
- Revealed: 4 least profitable industries in Australia
- Is the new CBA BNPL service bad news for Afterpay and Zip shares?
- 5 things to watch on the ASX 200 on Thursday
- ASX 200 dips, CBA launches BNPL, Fonterra reports
- 2 ASX investing strategies that could give young people an advantage
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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