The Zip Co Ltd (ASX: Z1P) share price came crashing down as fast as it went up. In a matter of just 15 trading sessions it climbed from $6.70 to $10.50 and back to $6.70 again. With the PayPal fears behind us, could the Zip share price be ready to have a crack at $10 again?
Paypal fears forgotten
The reason for the initial broad BNPL sell off was due to PayPal launching a very similar product. This product will allow customers to pay for a purchase in four instalments over a six-week period, without being charged interest. The key advantage for PayPal is its existing network of more than 26 million merchants and 324 million users. The company has the capability to quickly and easily introduce its product offering to a much bigger audience at a potentially cheaper fee to merchants. Its impact on Zip is yet to be known, but nonetheless a potential risk for Zip's growth in the US. The PayPal fears combined with a broader sell off of tech shares saw the Zip share price sink almost 50% from recent peak to trough.
Is the Zip share price a buy?
The market is expected to continue in a volatile fashion leading into the US election and COVID-19 related fears. I believe investors could take advantage of the potential volatility to come as an opportunity to buy Zip shares at a cheaper price.
Notwithstanding the risks to the broader market, the Zip share price does appear to have found a bottom and starting to grind higher. I believe further catalysts and news will be needed for the Zip share price to have another crack at the $10 mark. So what could investors look forward to?
Firstly, the federal budget will be announced today with anticipated immense spending across all sectors of the economy to boost activity and underpin employment. The government hopes that bringing forward income tax cuts will lead to additional spending to kickstart the economy. This is likely to be good news for retail-related sectors including Zip.
Additional business updates particularly regarding its Quadpay performance will be key in reaffirming investors that PayPal is not a significant threat. Zip had previously updated the market on 24 August of Quadpay's record performance and growth. This update highlighted record monthly translation volume in excess of US$70 million in July, representing a 30% increase on the June quarter average and a 600% increase year on year. It added an additional 133,000 customers in July and surpassed the 2 million customer milestone in August. It does appear that the momentum is building the Quadpay.
Foolish Takeaway
A positive US market update and continued international expansion will be key for the Zip share price to have a crack at its recent record all-time high. I would prefer to be buying at a cheaper price for better risk/reward, and the current market volatility could offer that window of opportunity for those that believe in the Zip growth story.
