It certainly has been a difficult month for the Zip Co Ltd (ASX: Z1P) share price.
Since this time last month, the buy now pay later provider's shares have crashed a disappointing 38% lower.
This makes it the worst performer on the S&P/ASX 200 Index (ASX: XJO) over the period ahead of IOOF Holdings Limited (ASX: IFL) and Nearmap Ltd (ASX: NEA).
Why is the Zip share price down 38% in a month?
There have been a couple of catalysts for the underperformance of the Zip share price this month.
The first has been a major tech selloff on Wall Street's Nasdaq index, which has weighed heavily on the local tech sector.
In addition to this, news that payments giant PayPal intends to launch its own buy now pay later offering in the United States in the final quarter of 2020 has weighed heavily on its shares.
While Zip's US-based QuadPay business has a large and growing customer base in the country, it has nowhere near the same traction as market leaders Afterpay Ltd (ASX: APT) and Klarna.
Therefore, there are fears that smaller players such as QuadPay and Sezzle Inc (ASX: SZL) could get drowned out by the arrival of this behemoth in the market. Especially given how PayPal already has such a vast footprint in the lucrative market.
Is the Zip sell off a buying opportunity?
While the arrival of PayPal in the market is definitely a blow, it is worth remembering that the US market is estimated to be worth $5 trillion a year.
This means there's plenty of room for multiple players to operate successful and profitable businesses in this market.
In light of this, I think a long term and patient investment in Zip's shares could generate strong returns for investors over the 2020s.
Though, given the risks involved, it may be best to restrict the investment to just a small part of a balanced portfolio.
