The Sezzle Inc (ASX: SZL) share price has come under pressure again on Wednesday.
At one stage today the buy now pay later provider’s shares were down as much as 15.5% to $7.40.
When they hit that level, it meant the Sezzle share price had lost a sizeable 37% of its value since peaking at $11.83 on Friday.
Why has the Sezzle share price been sold off?
A combination of profit taking and concerns about increasing competition in the buy now pay later market have been behind the Sezzle share price sell off.
In respect to the latter, overnight on Monday, payments giant Paypal announced its intention to enter the market with its Pay in 4 product.
Pay in 4 is a short-term payment solution that will allow consumers to make a purchase and pay over four interest-free instalments. Just like Afterpay Ltd (ASX: APT) and Sezzle offer.
Given the size of PayPal, US$245 billion at present, its entry into the market could pose a threat for some of the smaller players such as Sezzle and the US-based QuadPay business owned by Zip Co Ltd (ASX: Z1P).
At present Afterpay has 5.6 million active customers in the United States and appears well-positioned to take on PayPal. Whereas Sezzle and QuadPay have a more modest 1.5 million and 2 million active customers, respectively.
Should you be concerned?
It’s difficult to know at this stage what impact PayPal’s entry into the market will have.
I’m not overly concerned for Afterpay as I believe it has such a strong presence and brand, that the added competition won’t hinder its growth.
It is also worth remembering that the industry is still in its infancy in the United States, with only a small fraction of the US$5 trillion retail market going through buy now pay later providers.
This could mean there’s plenty of room for all these companies to grow successful businesses over the next decade.
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More reading
- Why we’re on track for more record ASX share prices
- Why the Zip share price is plummeting 15% today
- ASX 200 jumps 1.6%: Afterpay tumbles, IOOF crashes, CBA pushes higher
- Why Afterpay, IOOF, Redbubble, & Zip shares are dropping lower
- PayPal scares investors in BNPL shares, time to sell?
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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