Zip Co Ltd (ASX: Z1P) shares has taken a beating in the past few weeks, along with its peers such as Afterpay Ltd (ASX: APT) and Openpay Group Ltd (ASX: OPY). Investors are most likely querying if the Zip share price has finally bottomed out following the recent market shocks.
It's worth noting that last month, the company's shares hit an all-time high of $14.53, before suffering a severe fall. At Friday's market close, Zip shares ended the day 5.2% down to $9.56 — a 34% decline from its record high.
Below, we take a closer look into what could be affecting the buy-now, pay-later (BNPL) company's share price.
Why is the Zip share price sinking?
With the company's latest half-year results wrapped up, there are a few catalysts as to what could be weighing down Zip shares.
Investors have again been spooked by renewed fears about a possible fourth COVID-19 wave in the United States. This comes as Texas and Mississippi opened up their doors to pre-COVID social norms. And to make matters worse, this could lead to the virus mutating into a new highly infectious strain.
So, what does this have to do with Zip?
Well, the company has been making strides to accelerate its growth strategy in the United States. Last August, the BNPL provider purchased QuadPay in a bid to capture the world's largest retail market. In its H1 FY21 report, Zip revealed that 40% of the total transaction value (TTV) in December came from the United States.
However, with the rise of a potential new COVID-19 variant along with a possible fourth wave, the outlook appears grim. The Zip business could be heavily affected should the economic climate again turn south.
Another factor that may be negatively impacting the Zip share price is two broker notes that were released early this month. Analysts at RBC Capital Markets raised its target price for Zip by 29% to $9.00. However, that's a current discount of 6% on today's value.
On the other hand, a note from Macquarie also slightly lifted its estimate, but to a bearish price of $5.70. Again, that is 40% lower than the going rate at the moment.
Foolish takeaway
While the Zip share price may be trading lower than what it was 4 weeks ago, patient investors have done extraordinary well. In comparison to this time last year, the company's shares are up 332%, and 80% year-to-date.
