Is Square about to ruin the Afterpay party?

The Afterpay Touch Group Ltd (ASX:APT) share price has dipped lower on Friday after Square launched a competing product in the United States…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The market may be pushing higher today, but the same cannot be said for the Afterpay Touch Group Ltd (ASX: APT) share price.

In early afternoon trade the payment solutions company's shares are down 0.5% to $17.67.

Investors may be responding to an announcement out of fellow payments company Square overnight.

On Thursday the San Francisco-based company announced the launch of Square Installments, which could be a threat to the Afterpay service.

According to the release, much like the Afterpay platform, the Square Installments "service provides sellers with access to a powerful tool for growing sales that has traditionally only been available to larger businesses. This new payment method gives their customers the freedom to pay for a large purchase by splitting it into easy, fixed monthly payments."

Users of the service will be able to pay for the product or service over 3, 6 or 12 months, for qualifying purchases between $250 and $10,000. The service is currently available in 22 U.S. states.

Unlike Afterpay, though, the service is not interest free and rates range from 0-24% APR.

One example given on the Square website is the purchase of a US$1,800 sofa.

Over three months the customer would expect to pay $605 per month, equating to a total of U$1,815. Over six months they would pay US$313 per month, totalling US$1,878. And over 12 months they would pay US$165 per month, which equates to a total of US$1,980.

Should you be worried?

One broker that isn't overly concerned is Goldman Sachs. It has retained its buy rating and lofty $26.15 price target on the company's shares.

It stated that: "We think APT's strategy in the US is clear (it's a very simple product), targeted (specific to Fashion and Apparel) and a strong value proposition (consumers who pay on time get the service for free). As such we see no reason to change our current forecasts for APT in the US market."

The broker did warn that it expects more competition to emerge in the near future, with companies like PayPal and Klarna likely to respond in some way.

For now, I agree with the broker and see Afterpay Touch as a good long-term investment. Though, it may be prudent to hold out for its next U.S. update before investing.

What about Zip Pay?

If Square were to launch the product in Australia then I would be concerned for Zip Co Ltd (ASX: Z1P) as it is a very similar offering. But I suspect a potential launch over here would be some time away.

Should you invest $1,000 in Zip Co right now?

Before you buy Zip Co shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Zip Co wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Man smiling at a laptop because of a rising share price.
Opinions

My 2 favourite ASX sectors to invest in

Finding your groove can help your investing success.

Read more »

Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett
Opinions

3 things I learned from Warren Buffett being the CEO of Berkshire Hathaway

The Oracle from Omaha is in his last year as CEO.

Read more »

A male ASX 200 broker wearing a blue shirt and black tie holds one hand to his chin with the other arm crossed across his body as he watches stock prices on a digital screen while deep in thought
Share Market News

5 things to watch on the ASX 200 on Tuesday

Here's what to expect on the local market today.

Read more »

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough trading day for ASX stocks this Monday.

Read more »

A bland looking man in a brown suit opens his jacket to reveal a red and gold superhero dollar symbol on his chest.
Broker Notes

Bell Potter names more of the best ASX 200 stocks to buy in May

These stocks could be best buys this month according to the broker.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

ASX 200 energy shares plunge on shock OPEC move

ASX 200 energy shares like Woodside and Santos are tumbling on Monday. Let’s find out why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why 4DMedical, Gold Road, Syrah, and Tyro shares are racing higher today

These shares are starting the week strongly. But why?

Read more »