The Zip Co Ltd (ASX: Z1P) share price has taken a turn for worse, down 11% in May to a 5-month low of $6.91.
Zip shares have gone from a peak 150% year-to-date return after surging to a record high of $14.00 on 16 February, to a return of just 23.5% today.
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What's driving the Zip share price lower?
Tech is not so hot right now
Factors such as market sentiment and sector performance are key drivers of the Zip share price. However, these are entirely out of its control.
There has been a noticeable rotation lately out of tech and growth shares, into more defensive sectors such as consumer staples and financials.
The S&P/ASX200 Info Tech (INDEXASX: XIJ) index has taken a turn for worse, down almost 10% in the last 5 trading sessions. The index is now down 16% year-to-date, signalling the weakness in Aussie tech.
This would be understandable if the broader market was struggling, however, the S&P/ASX 200 Index (ASX: XJO) is up some 6% year-to-date.
While investors might argue the growth opportunity at hand, such as Zip's solid Quadpay performance and international expansion plans, its shares are swimming against the tide as tech falls out of favour.
A similar rotation effect took place late last year, where the Zip share price tumbled from highs of $10.50 to the $5 level between August 2020 and January 2021.
Heavy selling for BNPL shares
While the Zip share price has been able to stay in positive territory for the year, the same can't be said about its peers.
Many smaller BNPL shares with a market capitalisation of less than $1 billion and a lack of international exposure have slumped between 10% to 60% in the past few months.
The Splitit Payments Ltd (ASX: SPT) share price has almost halved from $1.30 to 69.5 cents this year.
While the likes of Laybuy Group Holdings Ltd (ASX: LBY) never took off after listing on the ASX on 7 September 2020. Laybuy shares went as high as $2.30 on its ASX debut but currently trade at just 68 cents.
Foolish takeaway
It's possible that the recent weakness in the Zip share price is a reflection of the tech sector's underperformance and broader market volatility.
The company is still in the active pursuit of both core and international growth opportunities, following its solid set of third-quarter results and recent $400 million capital raising.
