The Laybuy Group Holdings Ltd (ASX: LBY) share price continued its steep descent into negative territory today.
The buy now, pay later (BNPL) services provider closed the day down 5.13% with its shares trading at 18.5 cents each.
It seems weakness across tech-weighted indices and high-beta names in the S&P/ASX 200 Small Ordinaries index (ASX: XSO) have impacted Laybuy's share price these last few months.
The drawdown hasn't gone unnoticed either. In a note to clients today, analysts from Australian brokerage Bell Potter have slashed their recommendation on the company to hold from buy.
Let's take a closer look.
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Bell Potter tips Laybuy share price to plunge 72%
Following Laybuy's third-quarter trading update last week, Bell Potter analyst James Filius has made some updates to the broker's modelling for the company.
Laybuy didn't provide any specific guidance in its quarterly update, only that it has optimistic expectations of landing in the "top 3 BNPL providers in the large UK retail market".
Despite this, Filius cut customer growth estimates on Laybuy from FY22 onwards, restructuring earnings forecasts in the process.
For instance, the BNPL player recognised just 5% customer growth for this recent quarter, well short of the broker's internal estimates.
This prompted Bell Potter to reduce its forecasts on customer growth by 20% for FY22. In turn, this has resulted in a corresponding 6% haircut to revenue growth expectations.
As it goes in financial modelling, the downstep in sales and customer growth estimates has flow-on effects. Bell Potter has also lowered its earnings per share (EPS) estimates for the coming 3 years.
It's lowered FY22, FY23 and FY24 EPS estimates for Laybuy by 23%, 10% and 2% respectively.
Perhaps the most scathing outcome from Bell Potter's ratings downgrade today was the adjustment to its valuation on the company.
The broker now values Laybuy at just 24 cents a share after slashing its price target by 72%. That drop is parallel to losses seen by the company, and also the wider industry, over the last 12 months.
From another perspective, Canadian broker Canaccord Genuity rates Laybuy as a 'speculative buy' at an 85 cent valuation. However, it should be noted this rating was provided on 1 December 2021, well before the company's Q3 FY22 trading update last week.
Laybuy share price snapshot
In the last 12 months, the Laybuy share price has collapsed almost 87% and trails the benchmark index substantially over that time.
This year, things aren't any better with the company's shares down 21% since January 1.
That gives Laybuy a market capitalisation of $47 million.
