Afterpay shares drop: Morgan Stanley trims stake, UBS retains Sell

Afterpay share price dips from recent highs

The Afterpay (APT) roller coaster has continued on Wednesday, with the buy now pay later (BNPL) heavyweight’s share price dropping 6% in the first hour of trade.

This comes after the company has witnessed a monumental short-term share price run up: with the Afterpay share price rising 69% in the last month and 9% in the last five days.

At the time of writing Afterpay still traded close to its all-time highs, at $46.15 per share.

Morgan Stanley reduces its exposure

From an institutional perspective, blue-chip investment bank Morgan Stanley (MS) today revealed that it had further trimmed its still substantial stake in Afterpay.

Looking at how this has played out over the last couple of months: by March, MS had built a sizeable stake in the BNPL leader, owning 29,787,503 or 11.20% of APT's outstanding ordinary shares. MS has slowly been reducing its exposure since March, however. Indeed, by 6 April MS had reduced its stake in APT to 9.7%, on 11 May to 8.2% and today MS revealed that it had reduced its stake down to 7.12%.

At those levels, Morgan Stanley currently owns 21,896,173 ordinary Afterpay shares.

UBS remains unconvinced

Elsewhere, UBS this week – a long-focused APT bear – actually raised their price target on the BNPL darling, in response to the company’s recently announced 5 million US subscriber milestone. Here UBS bumped up their 12-month price target to $14.00 per share (from 13.00) though stuck to their Sell rating.

Though the investment bank notes that APT has been a benefactor of positive online sales trends, UBS remains cautious, saying:

‘While we think COVID-19 could accelerate positive structural changes for APT, we are cautious to extrapolate the magnitude of recent growth in online's share given the recent forced closures of shops.’

As a corollary to the impressive US customer growth APT has experienced during the coronavirus pandemic, UBS interestingly noted that ‘we assume that APT's credit decisioning system is performing well; we therefore lower the magnitude of our bad debt forecasts for FY21.’

Platitudes aside, UBS continues to stand out as the bear amongst a community of analysts who generally are infatuated by Afterpay’s growth prospects. Bell Potter for example, recently raised their price target on APT to $51.50 per share.

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4. Click on ‘buy’ or ‘sell’ in the deal ticket
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