Is Zip (ASX:Z1P) the titanic of ASX tech shares? It just keeps sinking

Key Points

• Zip shares touch 52-week low of $2.78 on back of negative sentiment surrounding the industry
• Rising inflation costs, COVID-19 variants and geopolitical tensions are causing fear across markets
• Zip scheduled to report its results late this month

What a wild year it has been for the Zip Co Ltd (ASX: Z1P) share price.

From reaching an all-time high of $14.53 a little less than 12 months ago to bottoming out to a 52-week low of $2.78 last week. To save you doing the math, that represents a fall of more than 80% if you invested at the peak.

Although the buy-now pay-later (BNPL) company’s shares have staged a mini comeback, they are still 25% down compared to pre-pandemic levels.

You may be wondering if Zip shares are going to keep tumbling or have they finally hit support.

Why have investors fell out of love with Zip shares?

At the time of writing, the Zip share price is sinking by 8.7% to $2.94 following negative sentiment across the tech industry.

Early this morning, Meta Platforms Inc (NASDAQ: FB), also known as Facebook released its fourth-quarter results to investors.

The tech giant shocked the market with missed revenue and earnings projections due to rising inflation costs. This caused investors to dump the stock by 22.89% in the after-hours of trading on the Nasdaq.

While the slump is related to inflation in the United States solely, Australia has been experiencing its own inflationary issues.

The Reserve Bank of Australia signalled two rate hikes for 2022 in an effort to slow down the rising price of goods. Supply and demand imbalances due to COVID-19 along with the reopening of the economy have led inflation to spike.

What this means is that consumers are less likely to spend on discretionary items when interest rates are picking up. The cost of debt such as credit cards as well as personal loans will require extra payments, affecting consumer spending habits.

Unfortunately for Zip, this is the heart of its business model in the BNPL sector. And what’s more is that the company has confirmed its interest in buying fellow rival Sezzle Inc (ASX: SZL).

In addition, mobile payment company Block Inc CDI (ASX: SQ2) share price also tanked by 10% at close on the Nasdaq.

The company signalled inflation, COVID-19 variants, and geopolitical tensions between Russia and Ukraine as causes.

Nonetheless, this has had an adverse effect on shares in the S&P/ASX All Technology Index (ASX: XTX). This includes former market darling Altium Ltd (ASX: ALU), and Appen Ltd (ASX: APX), along with other popular shares.

All eyes will be on Zip’s financial results when the company reports later this month.

Zip share price summary

Over the past twelve months, the Zip share price is down 62%, with year to date down more than 30%.

Based on the current Zip share price, the company has a market capitalisation of around $1.74 billion.

The post Is Zip (ASX:Z1P) the titanic of ASX tech shares? It just keeps sinking appeared first on The Motley Fool Australia.

More reading

• Is Zip’s (ASX:Z1P) potential acquisition of Sezzle the right strategy?
• Why did these tech shares lead the ASX 200 today?
• How much value would buying Sezzle add to the Zip (ASX:Z1P) share price?
• These are the 10 most shorted ASX shares
• ASX 200 (ASX:XJO) midday update: Ansell crushed, ResMed upgraded

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Meta Platforms, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has recommended Meta Platforms, 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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