The BNPL (buy now pay later) bloodbath continued this morning, after another rough night for US tech stocks.

Selling in the space has been fairly concentrated over the past two weeks, accompanying the rise in bond yields which caught the market’s attention over the past fortnight.

Here’s a recap of the first hour of trade today (as at 11:15am EST):
 

Code Company Price %Day %Mth MktCap
APT Afterpay Limited 100.85 -9.3% -34.3% $31,779,103,516
Z1P Zip Co Ltd. 8.41 -5.7% -14.2% $4,926,715,326
SZL Sezzle Inc. 7.54 -7.5% -20.8% $833,100,645
SPT Splitit 0.99 -4.8% -34.4% $474,978,941
OPY Openpay Group 2.47 -5.7% -8.2% $217,895,499
HUM Humm Group Limited 0.965 -2.5% -24.9% $490,315,635
LBY Laybuy Group Holding 1.215 -3.2% -9.7% $218,950,096
ZBT Zebit Inc. 1.14 -2.1% 0.9% $110,079,049
PYR Payright Limited 0.81 0.6% 1.3% $47,786,202
DOU Douugh Limited 0.195 -2.5% 25.8% $71,878,762
IOU Ioupay Limited 0.48 -3.0% 140.0% $272,948,972

 

BNPL bloodbath

Jumpy bond markets have prompted some material repositioning in capital flows over the past fortnight.

Accompanying the shift, the tech-focused US Nasdaq 100 index has slumped by more than nine per cent since February 22.

Over the same time, shares in BNPL leader Afterpay (ASX:APT) have fallen from an intraday high of $155.70 (on Feb 22) to this morning’s level near $100 — a fall of around 50 per cent.

Shares in APT have now fallen for 10 of the past 11 trading days, with similar trading action in other hot BNPL stocks such as Zip Co (ASX:Z1P) and Sezzle (ASX:SZL).

Higher yields are often viewed as negative for high-growth tech stocks, because it results in higher discount rates being used on the future cash-flows baked into their valuations.

But a feature of the price action over the past two weeks is that there hasn’t been selling across the board.

Other sectors that benefit from higher rates (such as banks) and industries tied to the ongoing reopening of the economy have performed well.

As a case in point, while the Nasdaq 100 fell by another 2.92 per cent overnight, the broader Dow Jones index rose by 0.97 per cent.

That marks a notable shift to the dominant post-COVID paradigm in 2020, when tech stocks roared ahead while rates stayed anchored at record lows.

It’s a similar case on the ASX this morning too, with sharp selling across the BNPL space juxtaposed against a ~0.6pc gain for the ASX200.

Despite the recent sell-off, Sezzle is still trading at around $7.50 in morning trade — a gain of around 1,700 per cent from its COVID-19 crisis lows in March 2020.

And Afterpay’s current valuation of $100 is a multiple of more than 10x from last year’s selloff when it fell below $10.

So while the sector has cooled off, markets are now in the process of finding the right valuation balance with the prospect of higher interest rates weighed against the sector’s growth outlook.