Why has the Zip (ASX:Z1P) share price gone nowhere in FY21?

Zip Co Ltd (ASX: Z1P) shares struggled in the second half of 2020 despite the company’s strong growth performance and positive announcements. With everything that’s going for the buy now, pay later (BNPL) company, why has the Zip share price gone nowhere in the first half of FY21? 

Popularity didn’t translate to a higher Zip share price 

Zip has proven itself to be one of the most popular shares on the ASX. Online broker Superhero revealed that Zip was the most popular stock on its platform in 2020.

Similarly, Commsec’s weekly most traded Australian shares update regularly features Zip shares. In its most recent update for shares traded between 7 to 12 December, Zip shares were the second most traded on the ASX. Buyers accounted for 59% of trades, even though the Zip share price lost ground during that week.  

Major achievements in FY21 

Despite the underperformance of the Zip share price, the company delivered a series of positive achievements in FY21 including:

• 20 July: Signed agreement with Respiri Ltd (ASX: RSH), providing entry into Australian pharmacy segment.
• 26 August: Announced partnership between Zip Business and eBay for Australian SMEs. 
• 1 September: Completed 100% acquisition of QuadPay.
• 20 October: Launched ‘Tap & Zip’ product for use anywhere that accepts Visa.
• 11 December: Partnership between Zip Business and Facebook announced.
• 16 December: Executed $120 million capital raising.

Zip share price not the only underperformer 

While it might feel like there is something fundamentally wrong with Zip, the broader buy now pay later sector also struggled to make headway after the August reporting season. To add some perspective, let’s take a look at the performance of the following ASX BNPL shares between 1 August and 31 December 2020: 

• Openpay Group Ltd (ASX: OPY) down 32% 
• Sezzle Inc (ASX: SZL) down 8% 
• Splitit Ltd (ASX: SPT) down 6%
• Laybuy Holdings Ltd (ASX: LBY) down 36%
• Humm Group Ltd (ASX: HUM) up 2% 

The only outlier was, of course, the Afterpay Ltd (ASX: APT) share price which soared 70% in that timeframe. 

Foolish takeaway

Despite its achievements to date, big brokers are still wary of buy now pay later shares. On 18 December, Macquarie Group Ltd (ASX: MQG) saw Zip’s recent capital raising as a small positive for the business, but maintained a target of just $5.05 for the Zip share price. This represents a 6.1% discount to the $5.38 Zip shares are currently trading at. 

More reading

• ASX 200 down 0.3%: BHP & Rio Tinto rise, big four banks drop, Zip sinks
• The top performing ASX 200 tech shares of 2020 
• Could the Zip (ASX:Z1P) share price make a comeback in 2021? 
• These are the 10 most shorted shares on the ASX
• 3 exciting ASX payment shares to buy in January

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Lina Lim 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 Facebook and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Facebook, Humm Group Limited, and Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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