Why ASX BNPL shares like Afterpay, Zip, and Sezzle are sinking

It’s a rough day on the market for investors in buy now, pay later companies like Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P), and Sezzle Inc (ASX: SZL).

At the time of writing, shares in these companies are down a whopping 9.46%, 9.38%, and 9.24% respectively.

While there are many reasons why these share prices are moving – among them the reported entering of Apple Inc (NASDAQ: AAPL) into the BNPL sector, another factor may be the sharp rise in inflation in the US.

Historically, perceptions of rising inflation have been damaging to growth stocks like Afterpay and Zip.

Let’s take a closer look.

ASX tech down as US inflation up

It’s not just BNPL shares that are suffering today. Despite a rising S&P/ASX 200 Index (ASX: XJO) – up 0.44% – the S&P/ASX All Technologies Index (ASX: XTX) is down 1.32%. It follows on from a fall in the tech-heavy Nasdaq Composite overnight.

Motley Fool Australia’s own chief investment officer Scott Phillips says that the performance of American stock and Australian shares usually correlate.

“I think it’s common for the ASX to follow US markets, almost slavishly,” he previously told this reporter.

“The old saying is ‘when America sneezes, Australia catches a cold’.”

The previously mentioned inverse relationship between inflation and growth stocks could be behind the fall in the Nasdaq, along with the news of Apple’s entry into the market.

Reuters is reporting last month’s inflation of 0.9% – the largest in 13 years – is greater than economist expectations of 0.5%. Despite a 5.4% rise in annual CPI, most experts quoted by Reuters say the figures are probably one-off.

“June’s CPI numbers looked scary but, once again, we see that it was mainly temporary price increases that pumped up the figures,” economist Robert Frick told the publication.

Despite those reassurances from experts, investors may be worried by the spectre of inflation. That’s judging by the massive falls in the Afterpay, Zip, and Sezzle share prices.

Afterpay, Zip, and Sezzle share price snapshots

This isn’t the first time a sell-off possibly linked to inflation has hit Afterpay. In May, shares in the ASX BNPL provider fell 5% on inflation fears. Zip and Sezzle have also faced similarly bad days. These companies tend to move in tandem with one another.

Despite a red day for these companies, it’s been a green year. Over the past 12 months, shares in Afterpay, Zip, and Sezzle have increased 61%, 5.7%, and 7.1% respectively.

The 52-week highs of these companies are $160.05, $14.53, and $11.99.

The post Why ASX BNPL shares like Afterpay, Zip, and Sezzle are sinking appeared first on The Motley Fool Australia.

More reading

• What to consider before investing in blue-chip ASX shares
• Why Afterpay, PointsBet, Webjet, & Zip shares are sinking
• ASX 200 midday update: Afterpay & Zip sink, Orocobre rises on broker upgrade
• Why the Zip (ASX:Z1P) share price is down 10% on Wednesday
• As markets fall, big business fights back against disruptive growth stocks

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Apple, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Apple. 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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