UBS cites Commonwealth Bank’s ((CBA)) foray into BNPL as evidence of competition in the space. It’s also considered to highlight risk around ‘no surcharge’ rules.
According to the broker, many consumers are unaware of Afterpay’s costs to merchants (3-7%), assume the service to be free and are thereby incentivised to use the service.
Under current rules the merchant can surcharge Commonwealth Bank’s cheaper alternative but not Afterpay’s offering. Over time, UBS believes it is likely that ‘no surcharge’ rules could eventually be regulated, to the detriment of Afterpay.
Sell rating and $36 target retained.
Sector: Software & Services.
Target price is $36.00.Current Price is $112.99. Difference: ($76.99) – (brackets indicate current price is over target). If APT meets the UBS target it will return approximately -214% (excluding dividends, fees and charges – negative figures indicate an expected loss).