The Australian share market may be pushing higher today, but the same cannot be said for the Zip Co Ltd (ASX: Z1P) share price.
In afternoon trade the buy now pay later provider’s shares are down 8% to $8.80.
This compares to a 0.6% gain by the S&P/ASX 200 Index (ASX: XJO).
Why is the Zip share price sinking?
There appear to be a couple of catalysts for today’s weakness in the Zip share price.
The first is a broker note out of Macquarie on Friday. According to the note, the broker has retained its underperform rating but lifted the price target on the company’s shares to $5.70.
Even after today’s pullback in the Zip share price, this price target implies potential downside of 35% over the next 12 months.
Macquarie has concerns that its QuadPay business in the United States could experience a meaningful reduction in its net transaction margin due to increasing competition.
In addition, the broker fears that customer acquisition costs could increase and future growth will be harder to come by.
What else is weighing on Zip shares?
Also weighing on the Zip share price today could be news that current futures contracts are pointing to a decline on the tech-heavy Nasdaq index tonight.
According to CNBC, current futures contracts indicate that the Nasdaq index will drop 1% at the open.
This appears to have led to concerns that the tech selloff is still not over and that tech stocks could still drop further before bottoming.
It isn’t just the Zip share price sinking today. Rival Afterpay Ltd (ASX: APT) has given back its morning gains and is tumbling lower.
This has led to the S&P/ASX All Technology Index (ASX: XTX) dropping 0.6% in afternoon trade. This compares to a gain of approximately 2.5% in morning trade.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and 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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