The age-old saying "sell in May and go away" came home to haunt Afterpay Ltd (ASX: APT) shares last month.
The Afterpay share price began the month of May at $117.65. This was far from its February record highs of $160.05 but also a considerable improvement on the $100 it was fetching in late March. But things deteriorated quickly for Afterpay shares, which fell by as much as 30% over the month to an 8-month low of $81.85 on 13 May.
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What's been impacting the Afterpay share price?
ASX 200 tech shares under pressure
The S&P/ASX200 Info Tech Index (ASX: XIJ) index fell by as much as 18% in May. The index has since bounced off 8-month lows but is still down around 10% for the month.
This was consistent with the weakness experienced on Wall Street, where the tech-heavy Nasdaq Composite (NASDAQ: .IXIC) also slumped by as much as 7% before bouncing off lows.
Afterpay wasn't alone in this selloff, with its tech heavyweight peers such as WiseTech Global Ltd (ASX: WTC) and Xero Limited (ASX: XRO) experiencing similar harsh selloffs at the beginning of the month.
There are a number of moving parts contributing to tech shares underperforming the market. On one hand, the prospect of higher inflation and interest rates could be weighing on the valuations of richly valued tech shares. As the economy emerges out of the coronavirus pandemic, pent-up demand and soaring commodity prices could prompt central banks to take the breaks off record-low interest rates.
Another recent theme to consider is the idea of pandemic winners turning into vaccine losers. One example of this can be seen among ASX e-commerce shares such as Kogan.com Ltd (ASX: KGN) and Redbubble Ltd (ASX: RBL) that appear to be cycling through a period of tough comparables and normalisation in consumer spending. We all know the last thing investors want to see in a growth story is a slowdown in momentum.
BNPL struggles
As mentioned, it wasn't only the Afterpay share price that was struggling in May. The buy now, pay later (BNPL) sector appeared to amplify the weakness across the broader tech sector last month. Large-cap ASX-listed BNPL shares including Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX: SZL) are now also far from their February record highs but have managed to stay in positive year-to-date territory.
The same can't be said for some smaller BNPL shares.
Laybuy Holdings Ltd (ASX: LBY) shares hit a record all-time low in May of 51.5 cents after starting the year at $1.30. The company's shares have made a small bounce off these lows, finishing the month at 72 cents.
The price action has been similar for peers including Openpay Group Ltd (ASX: OPY) and Splitit Ltd (ASX: SPT), which both slumped to, or very close to, 12-month lows during May.
Elsewhere, US-listed BNPL giant, Affirm Holdings Inc (NASDAQ: AFRM) also hit record all-time lows of US$46.50 in May, down from the US$70 it was fetching at the start of the month. But on a more positive note, after a few trading sessions around the US$50 level, its shares bounced off lows to close at US$60.81 last Friday.
