Is the Zip (ASX:Z1P) share price a buy in the tech crash?

The Zip Co Ltd (ASX: Z1P) share price has been under the pump in recent days. Are the BNPL leader's shares back in the buy zone?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Zip Co Ltd (ASX: Z1P) share price has been smashed in recent days as investors have sold out of ASX tech shares.

Heavy sell-offs in the US markets are continuing and we're seeing similar moves on the ASX. That's not good news for shareholders in some of the hottest tech shares right now.

The Zip share price is down 8.9% since Tuesday morning and could be heading even lower today. So, is now a good time to buy the dip and enter the buy now, pay later (BNPL) share?

rising arrow breaking down

Image source: Getty Images

Why the Zip share price is under pressure

There's no denying 2020 has been a strong year for global and domestic tech shares. Many of the biggest shares have been surging in value since the bottom of the March bear market.

That has all been against a backdrop of intense economic stress and recessionary conditions. Investors are a bit spooked right now and we've seen heavy sell-offs in US tech stocks this week.

Much of the value in ASX tech shares like Zip is based on future growth expectations. That's a hard thing to value right now, which has left investors wondering how high is too high for these tech shares.

The Zip share price is still up a whopping 81.4% for the year. I don't think it's panic stations by any means but is now a good time to buy in?

Is now a good time to buy?

The lofty valuations are an obvious concern for investors. Zip increased full-year revenue by 91% to $161.0 million as transaction volumes also jumped 91% to $2.1 billion.

However, the company still posted an adjusted loss before tax of $44.9 million. That can be beneficial for tax reasons but the point stands that the Zip share price is high for a company that isn't turning a profit (yet). 

Regulatory risk is also always a concern for the BNPL operators.

There's also increasing competition in the BNPL space. Major banks like Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) are wading in.

Both of these big four banks announced yesterday that they were introducing no-interest, flat monthly fee card options.

That could open up the market and potentially entice merchants to go to the bank rather than pay fees to Zip.

Foolish takeaway

The Zip share price has been under pressure in recent days but is still up strongly in 2020. I don't think there is any cause for alarm just yet but I won't be entering as a first-time buyer right now.

Ken Hall 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 has no position in any of the stocks mentioned. 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.

More on Technology Shares

A couple sit in front of a laptop reading ASX shares news articles and learning about ASX 200 bargain buys
Earnings Results

FINEOS swings to profit in 1H26

FINEOS posted higher revenue, swung to profit, and outlined growth plans.

Read more »

Two IT professionals walk along a wall of mainframes in a data centre discussing various things
Technology Shares

Megaport shares are up more than 100% in 3 months. Are they still a buy?

Can the AI hype drive this stock even higher?

Read more »

A graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price today
Broker Notes

Up 250%! Broker tips this dividend paying ASX All Ords tech stock for more outsized gains

A top broker forecasts more outperformance from this dividend paying ASX tech stock.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Technology Shares

Bravura Solutions FY26 earnings: Revenue, profit, and dividends climb

Bravura Solutions surged 13% yesterday after releasing the result.

Read more »

A line up of job interview candidates sit in chairs against a wall clutching CVs on paper in an office setting.
Technology Shares

Seek shares plunge 14% despite solid results: Did investors overreact?

The market may be pricing in slower growth, weaker guidance and long-term AI disruption.

Read more »

Man analysing data on his laptop.
Technology Shares

Why this could be the best ASX tech stock to buy and hold

Xero already has almost five million customers, but I think there is still plenty of room for the business to…

Read more »

Businesswoman with a pleased smile reading on her laptop at a desk in the office with a look of satisfaction.
Technology Shares

Pro Medicus lands $23m St. Luke's Health System imaging contract

St. Luke’s Health System is Idaho’s largest private employer and not-for-profit healthcare provider.

Read more »

Young woman waiting for job interview.
Earnings Results

SEEK Ltd FY26 earnings: record dividend and strong revenue rise

SEEK reported a 17% increase in sales revenue to $1,284 million.

Read more »