Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Afterpay share price plunges 7.2% on bearish UBS report

How much longer does the Afterpay growth story have left to run?

The reaction was sharp and immediate.

Afterpay (ASX: APT), the fast rising market darling saw its share price drop off a cliff today, as a bearish broker note from UBS triggered a mini investor exodus.

By the late afternoon APT had fallen about 6.5% but ended out the session at A$33.92 per share, some 7.2% lower overall.

Afterpay share price: the UBS take

The crux of the report: competition, execution risks and regulation all pose a threat to Afterpay’s stratospheric growth prospects.

Considering all this, UBS hit the stock with a ‘sell’ rating and placed a price target of A$17.25 on the young company.

UBS also put a ‘sell’ rating and a price target of A$4.80 on Afterpay rival Zip.


Regulation looks to be one of the key concerns here, with a significant portion of the people that UBS surveyed, as part of its 'Evidence Lab', viewing Afterpay’s BNPL offering as ‘credit’; a title that Afterpay has itself long fought against.

Such a view – coupled with Afterpay’s intense popularity – could prove a catalyst for increased regulatory scrutiny in the buy now pay later space (BNPL), thinks UBS.

Moreover, given that Afterpay is currently 100% concentrated in BNPL, UBS further points out that it looks to be the most susceptible to regulatory risk – opposed to the likes of Zip, whose operations are less concentrated.


Second, Afterpay’s share price – at its current price levels – already has significant levels of growth priced in. Projecting well into the future, UBS believes Afterpay would require GMV figures of A$175 billion by the 2030 fiscal year, to justify its share price.

Afterpay (ASX: APT) itself is targeting around A$20 billion GMV by FY22.


Finally, UBS also worries that low barriers to entry in the BNPL space could pose a problem for Afterpay going forward.

Whiffs of competition have indeed generated bouts of investor skittishness in the past. When VISA first announced plans to enter the instalments payment space in July – investors bid APT’s stock down in short order.

Funnily enough, VISA has actually since partnered with Afterpay and investors have seemingly all but forgotten about the payment behemoth’s intended foray into the space.

Noting all this, bearishness is probably an understatement when you consider that Afterpay’s share price crossed the $37 mark just this Tuesday.

In saying that, at least the UBS take gives a little bit of variance to the broker outlook. Afterpay’s stock after all has been on a tear in recent months: in August it traded for just A$22. FY19 results which saw GMV figures run past A$5 billion and then a string of broker reports that pegged Afterpay as outpacing its own GMV predictions helped it run to all-time-highs.

Morgan Stanley just yesterday released a broker report pitching Afterpay as a potential A$44 dollar stock.

Goldman said approximately the same thing – hitting APT with a A$42.90 price target in recent times. Afterpay’s shares kicked-up 14% on that report alone and the ASX issued a ‘please explain' notice.

Will they do the same thing now one wonders?

Scott the ‘WeWork IPO killer’ Galloway weighs in

UBS is trailing the market somewhat in their Afterpay ‘could crash’ thesis. For those not in the know, Galloway recently came to fame for his contrarian take on the WeWork prospectus. WeWork has since shelved its IPO indefinitely as it works through a number of issues.

Indeed, Scott Galloway just last week came out with the now slightly-less-audacious prediction that ‘these stocks [of Buy Now Pay Later firms] will likely be halved in the next 12 months as visa rolls out its product.’

UBS is now on the bearish bandwagon it would seem. Of course, traditional valuation metrics would indeed tell you that Afterpay is richly valued – with the company carrying a hefty price-to-sales ratio of 26.68, according to the Wall Street Journal.

Whether Afterpay can keep pace with its valuation however is another story entirely.

It will be interesting then to see how this plays out over the next 12-months.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Act on share opportunities today

Go long or short on thousands of international stocks with spread bets and CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.