Should Afterpay shareholders be concerned about Shopify's BNPL launch?

The Afterpay Ltd (ASX:APT) share price has come under pressure on Friday. Should you be concerned by Shopify's BNPL launch?

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 Afterpay Ltd (ASX: APT) share price is on course to end the week with a day in the red.

At the time of writing the payments company's shares are down almost 3% to $70.00.

Zip share price man hitting digital screen saying buy now pay later

Image source: Getty Images

Why is the Afterpay share price dropping lower?

Investors have been selling Afterpay's shares on Friday after a disappointing night of trade on Wall Street's technology-focused Nasdaq index.

US-China tensions and worse than expected jobless claims data hit sentiment and weighed on U.S. tech shares overnight. This led to the famous index dropping 2.3% lower.

It isn't just Afterpay that is dropping lower today. The likes of Altium Limited (ASX: ALU) and Nearmap Ltd (ASX: NEA) are also in the red. This has dragged the S&P/ASX 200 Information Technology index 1.6% lower.

What else is weighing on Afterpay's shares?

There is also a spot of industry news that could be weighing on the Afterpay share price today.

Fellow buy now pay later company Affirm, which is run by PayPal co-founder Max Levchin, has just announced a partnership with Canadian e-commerce giant Shopify on a new interest-free, zero-fee payments program for online customers.

According to CNBC, the new "Shop Pay Installments" offering will give approved Shop Pay customers the option to split the total purchase cost into four equal, bi-weekly payments, which will be processed and handled by Affirm. This is identical to the Afterpay model.

While this is certainly going to increase competition in the industry, one broker that isn't concerned is Goldman Sachs.

What did Goldman say?

Goldman commented: "Clearly alternatives are emerging to APT. SHOP has a merchant and consumer reach which could allow them to acquire a user base more rapidly than most of APT's other US competitors (especially the likes of Quadpay, Sezzle and Klarna)."

"However, if APT has a large enough consumer base which is transacting frequently (which is what is occurring), merchants may be prepared to adopt both services. In addition, SHOP's BNPL product will be limited to merchants who use SHOP."

In light of this, the broker advised that it is leaving its "forecasts unchanged as we believe this announcement is unlikely to impede the company's achievement of our forecasts."

I agree with this view and continue to believe Afterpay would be a fantastic long term investment option.

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 Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap Ltd. and Sezzle Inc. 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

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

Man stands with head on his hands in front of a downward graph.
Share Market News

Here's why ASX 200 energy shares were the only risers last week

Energy was the only ASX 200 market sector to finish in the green as the war in Iran continued.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

These ASX 200 shares could rise 30% to 100%

Morgans thinks these shares are dirt-cheap buys.

Read more »

Worried man sitting at desk in front of PC with his head in his hands.
Opinions

A stock market crash feels like it might be imminent

Rising geopolitical tensions and market volatility are making some investors uneasy.

Read more »

Big percentage sign with a person looking upwards at it.
Share Market News

Buying ASX shares? Here's what to expect from Tuesday's RBA interest rate decision

ASX investors are increasingly pricing in another RBA interest rate increase on Tuesday. Will it happen?

Read more »

A man sits in contemplation on his sofa looking at his phone as though he has just heard some serious or interesting news.
Share Market News

Here's what Westpac says the RBA will do with interest rates next week

Will the central bank hike rates? All signs point to yes.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

Ord Minnett tips these ASX All Ords shares to rise 30% to 50%

Let's see what the broker is recommending to clients.

Read more »

Five young people sit in a row having fun and interacting with their mobile phones.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors ended the trading week on a sour note today.

Read more »