Why did the Zip share price crash over 50% in June?

It certainly was a month to forget for the Zip Co Ltd (ASX: ZIP) share price in June.

Over the 30 days, the buy now pay later (BNPL) provider’s shares lost a massive 52% of their value.

This made the Zip share price the worst performer on the ASX 200 index last month.

It also means the company’s shares are were 90% since the start of the year.

Why did the Zip share price crash in June?

The Zip share price came under significant selling pressure last month for a number of reasons.

One of those came early in the month when tech giant Apple announced the launch of its BNPL service.

Apple’s BNPL service works with any merchant that already supports Apple Pay and does not require a new payments terminal. Furthermore, consumers can use the service even if the merchant doesn’t actively offer BNPL.

What else?

In addition to this increasing competition, the Zip share price came under pressure amid broad weakness in the tech sector last month. This saw the S&P ASX All Technology index lose over 10% of its value during the period.

This weakness was caused by concerns over rising rates, which has led to a derating of growth stocks, recession fears, and the tough consumer environment. Investors appear to believe that these are the ingredients for a spike in bad debts.

Though, it is worth noting that Zip put out a business update last month which stated that its underlying business remains strong, with growth in customer numbers and transaction volumes. Management also stressed that it was focusing on driving its credit losses below the 2% threshold of total transaction volumes (TTV).

However, this was not enough to keep many investors on board, as you can see from the abject performance by the Zip share price. Remaining shareholders will no doubt be hoping for better in July.

The post Why did the Zip share price crash over 50% in June? appeared first on The Motley Fool Australia.

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More reading

• June was a terrible month for ASX BNPL shares. Here’s why
• These were the worst performing ASX 200 shares in June
• Could ASX BNPL shares be set for imminent regulation as spending swells to $12 billion?
• Zip shares sink 6% despite BNPL spend doubling this financial year
• Why this economist believes ASX 200 BNPL shares are key to keeping the market competitive

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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