The Afterpay Ltd (ASX: APT) share price has sunk below the iconic $100 level, down 4.50% at the time of writing to $95. Its shares are down more than 25% in the last 14 trading sessions to levels not seen since November 2020.
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Why is the Afterpay share price free falling?
Watching a growth powerhouse such as Afterpay shed 25% in value in a short span of time can be a tough pill to swallow. But the weakness in the Afterpay share price extends beyond its operational and financial performance. Here are some reasons that might explain why the market darling is facing a reality check.
A move away from BNPL shares
The Afterpay share price is swimming against the tide as the buy now, pay later (BNPL) sector comes under fire.
Large-cap BNPL shares including Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX: SZL) have been able to hold up relatively well year-to-date and stay within positive territory.
While small-cap players that lack an international footprint including Splitit Inc (ASX: SPT), Openpay Group Ltd (ASX: OPY), Humm Limited (ASX: HUM) and Laybuy Group Holdings Ltd (ASX: LBY) are all approaching one-year lows, or a decline of more than 50% since their February highs.
The broader weakness across BNPL shares signals a move away from the sector, with the smaller, less established companies bearing the brute of the selloff.
Sharp fall in the ASX tech index
To add further insult to injury, the S&P/ASX200 Info Tech (INDEXASX: XIJ) is down some 12% since last Friday. Conversely, the S&P/ASX 200 Index (ASX: XJO) is up 0.80% over the same period.
There appears to be a clear rotation from tech and growth-related sectors into value and cyclical sectors such as financials and materials.
Foolish takeaway
Afterpay is still a growth powerhouse with triple-digit growth across its key North American and European regions. However, the recent weakness and rotation of our tech shares combined with the significant underperformance in BNPL shares could spell trouble for the market darling.
