Why did the Zip share price dump 9% in April?

illustration of laptop with down arrow and the word zip representing zip share price going down.illustration of laptop with down arrow and the word zip representing zip share price going down.

The Zip Co Ltd (ASX: ZIP) share price declined in the month of April but it was not the only buy now, pay later (BNPL) share to fall.

Zip shares fell 8.9% from 56 cents at market close on 30 March to 51 cents at market close on 28 April.

Let’s take a look at what weighed on the Zip share price during the month of April.

What went on?

Zip outperformed multiple ASX BNPL shares during the month. For example, Block Inc (ASX: SQ2) shares declined 11% in April, while Sezzle Inc (ASX: SZL) shares plunged 18%.

Market sentiment for the BNPL sector appeared to be bearish in April amid wider market turmoil and ongoing US recession talk.

ASX BNPL shares including Zip followed in the footsteps of US counterparts. Affirm Holdings Inc (NASDAQ: AFFM) slid 12.51% in the month of April, while Block’s US listing Block Inc (NYSE: SQ) slid 11.24%.

Zip’s major announcement to the market during the month was a quarterly update on 20 April. On the day of this announcement, Zip shares climbed nearly 2%.

Group quarterly revenue lifted 15% on the prior corresponding quarter, transaction volume also jumped by 9% to $2.2 billion.

The company’s cash transaction margin also rose to 2.8% for the quarter, up from 2.5% in the third quarter of FY22. Revenue margin also leapt to 8.3%, up from 7.9% in the prior corresponding quarter.

Zip said its US business is experiencing “solid momentum” and is on track to end FY23 EBTDA positive. Zip’s CEO and co-founder Larry Diamond moved to the USA in October, stating at the time “there is still a significant opportunity for fintech in the US”.

Commenting on Zip’s outlook, CEO, managing director and founder Larry Diamond said:

We recognise that many household budgets are under pressure, whether it be inflation or
the rising cost-of-living, which means our mission and purpose has never been more

Also during the month, Zip became the new partner of the fitness platform Peloton Australia. ZIP ANZ CEO Cynthia Scott said this will offer Zip customers “a flexible and transparent financing option for Peloton’s products”. She added:

This is also incredibly timely, with shifts in spending habits and preferences in a post-pandemic world becoming the new norm. 

Zip share price snapshot

The Zip share price has declined 56% in the last year.

Zip has a market cap of about $388.3 million based on the last closing price.

The post Why did the Zip share price dump 9% in April? appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Monica O’Shea 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 Zip Co. 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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