The Zip Co Ltd (ASX: Z1P) share price has been spiralling downwards to post a loss of 15% in December. This comes despite the buy-now pay-later (BNPL) company providing a positive trading update for the month prior (November).
At yesterday’s market close, Zip shares finished the day flat at $4.39.
What’s going on with Zip?
Early this month, Zip provided investors with its monthly performance review, highlighting strong numbers for November.
While the company’s key metrics surged by double digits year-on-year, its shares accelerated by 20% over the two days. However, this was short-lived with the Zip share price quickly retracing during the following five business days (9 – 15 November).
A catalyst for the recent dip as described by management in the trading update could be the significant volatility in equity markets. The S&P/ASX All Technology Index (ASX: XTX), has fallen around 4% over the course of December.
In addition, the BNPL competition is continuing to ramp up as more entrants come into the industry.
In September, PayPal Holdings Inc (NASDAQ: PYPL) acquired Japanese BNPL company, Paidy to fuel its own growth.
Unfortunately for Zip, a rush of new direct players aiming to win global market share is becoming of concern.
National Australia Bank Ltd. (ASX: NAB) and Commonwealth Bank of Australia (ASX: CBA) have also entered the BNPL space. And if that’s not enough, Suncorp Group Ltd (ASX: SUN) partnered with Visa Inc(NYSE: V) for a new BNPL solution.
This is on top of the direct competition that Zip is up against which includes Afterpay Ltd (ASX: APT) and Sezzle Inc (ASX: SZL).
Furthermore, a couple of brokers reassessed the 12-month price target for Zip shares. As such, Swiss investment firm, UBS cut its rating by 5.5% to $5.20 apiece. American multinational investment bank, Jefferies had a more bearish outlook. Its analysts slashed its view on Zip shares by a massive 40% to $4.48.
It seems that investors have a similar tone on Jefferies’ prediction, with Zip shares currently trading on par.
Zip share price summary
It has been a whirlwind year for Zip investors. The company’s shares rocketed to an all-time high of $14.53 in February, before quickly plummeting throughout the year.
Zip commands a market capitalisation of around $2.57 billion and has more than 588.83 million shares on its registry.
The post Why has the Zip (ASX:Z1P) share price tumbled 15% in December? appeared first on The Motley Fool Australia.
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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 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 Bruce Jackson.
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