The Afterpay Share Price is Down 75%. Is Now the Time to Buy? (ASX:APT)

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ASX:APT - Afterpay Share Price

Buy now, pay later juggernaut Afterpay Ltd [ASX:APT] has taken a beating.

From its 20 February high, it fell over 75%.

Afterpay sent a letter to investors. They tried to calm the markets.

And today the APT share price is up 27%.

No doubt, this may have caught your attention.

Should you be buying Afterpay today, or not?

We’ll let’s take a look. But in case you didn’t know…

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Who is Afterpay Ltd [ASX:APT]?

Afterpay  call themselves a ‘multinational technology driven payment company.

Though, you know them better as one of Australia’s largest buy now and pay later provider.

Afterpay is the company’s service of ‘buy now, receive now and pay later’.

The company also offer ‘pay now’ services. This is a payment guarantee service for businesses to protect them against fraud.

So, about that letter to shareholders I mentioned before.

Let’s take a look at it…

Afterpay has said they ‘have not seen a material impact on our business activity and timing of instalment repayments or transaction losses to date’.

The company continued having a strong liquid position of over $672.1 million. And cash on balance sheet of $402.5 million.

No doubt this will give Afterpay a short-term safety net.

But if lower spending continues into the future, this will definitely hurt the company over the medium term.

And that’s with the positive H1 FY20 results, which the company provided the market 27 February.

At the time underlying revenue was up, merchant use grew by 86%.

So, what does all this mean and is Afterpay now a buy?

Well, I’m unable to answer that. But maybe the chart can give us a clue…

Take a look at it below…

What is the Afterpay chart suggesting?

Source: Trading View

[Click to open in a new window]

What you’re looking at above is the daily chart of Afterpay.

The company took a hefty beating from its $41 high. And fell all the way down to $9.50.

It’s clear that bottom fishers are coming in to buy Afterpay cheaply.

But if you’re wanting to add this share to your portfolio…

I’d err on the side of caution first.

There’s no telling yet if Afterpay is going to recover…and if it does it may not do so at the same rate it fell.

There are still many unknowns surrounding the coronavirus too.

Maybe wait a while and put this on your watch list. Make sure Afterpay is moving higher before you commit your hard-earned money to it.

A few days of higher prices is not enough to suggest the trend has changed, in my opinion.

Anyway, just something to keep in mind.

As always, this is not a recommendation to buy or sell APT. It is an update only. I hope you found it useful.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch

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