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Zip share price surges 30% in a week. Are we calling bubble yet?

The Zip Co Ltd (ASX: Z1P) share price surged 10.38% yesterday in another massive day for ASX payments shares. Zip shares closed at $6.07 on Wednesday but exploded to $6.70 at market close yesterday afternoon.

Yesterday’s incredible move means that the Zip share price is now up around 31% since 29 June, just over a week ago.

BNPL, Zip shares rocket ever higher

Zip isn’t the only ASX company making moves in the buy now, pay later (BNPL) space. Other ASX payments shares were also driving ASX investors into a frenzy yesterday. Sezzle Inc (ASX: SZL) shares shot up a stupendous 42% just yesterday, whilst Splitit Ltd (ASX: SPT) shares have doubled over the past month.

Zip’s arch-rival Afterpay Ltd (ASX: APT) has also been leaving investors giddy. Fresh from its short-but-sweet capital raising, Afterpay shares were up more than 12% yesterday and hit a share price above $74 in intraday trade. Like Zip, Afterpay is also up around 30% since 29 June. Happy New Financial Year indeed!

BNPL shares have attracted many growth and momentum investors since the S&P/ASX 200 Index (ASX: XJO) market low was hit on 23 March this year. On that day, Zip shares bottomed out at $1.05 and Afterpay at $8.01. That means anyone lucky enough to pick up Zip or Afterpay shares on that day would today be looking at a 538% and 826% gain, respectively, on yesterday’s share prices.

Are we in a payments bubble?

It’s hard to see these sorts of share price movements and not think we are now in ‘bubble territory’. Of course, bubbles are usually only completely evident after the inevitable ‘pop’.

So, what do we know right now about ASX payments shares? Yes, they are in a powerful tailwind of shifting consumer preferences. Yes, they are all growing fast (some more than others).

But we don’t know how this sector is going to look in 10 years’ time. Could Zip bulldoze Afterpay? Could Afterpay buy out Openpay Group Ltd (ASX: OPY)? It’s very early days in this space, and right now the market is treating every payment company like they have already achieved domination. I’m sure at least one of the companies named in this article will be a lot larger and a lot more dominant in this field in a decade’s time. But I’m equally certain that not all of them will be.

Foolish takeaway

If you’re absolutely convinced that one of these companies has what it takes to win this game, by all means, continue to invest according to your bullish thesis. But if you’re not sure, perhaps it would be wise to stay on the sidelines and watch this space for now. Missing out on a winner is tough, but losing permanent capital on a failed investment thesis is a lot tougher.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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