The Zip (ASX: Z1P) share price has rocketed up 14% in a week. Let's see why

Why are Zip shares up 14% in the past week?

| More on:
business ups and downs, roller coaster, share price ups and downs, cyclical

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Zip Co Ltd (ASX: Z1P) share price has certainly been on a roller coaster over the past week. As it stands on paper, Zip shares are up 13.74% over the past 5 trading days. That includes the 0.61% that Zip shares have added so far today.

However, that number hides the fact that Zip shares climbed all the way up to near $9 a share last Thursday. Today, Zip remains down more than 7% from that high. It's trading at $8.28 a share at the time of writing.

The rollercoaster metaphor can be extended to 2021 as a whole. Zip shares are currently up a very healthy 48% year to date. However, back in February, Zip shares climbed as high as $14.53.

That put them up a staggering 163% year to date at the time. At the current share price, Zip remains down 40% from those highs.

But let's turn back to the past week. What's gone so right for this buy now, pay later (BNPL) company recently?

Is Klarna BNPL-ing some shares?

Well, it's likely that a large chunk of Zip shares' recent success can be put down to the rumours making their way around the markets last week. As my Fool colleague James covered at the time, it was reported in the Australian Financial Review that the European BNPL provider Klarna has taken a 4% stake in Zip Co.

The report states the motivation behind the move was "designed to give it options should the buy now, pay later sector consolidate down to two or three main players globally".

Klarna itself is part-owned by Commonwealth Bank of Australia (ASX: CBA). This remains speculative since neither Zip nor Klarna have confirmed (nor denied) this rumour.

Even so, the reaction from investors was one of enthusiasm. Zip shares spiked close to 15% on the morning of the report and had climbed even higher by the end of trading. However, since then, the excitement has cooled somewhat, as we noted above.

Are Zip shares a buy today?

One broker who thinks there might still be some upside in the current Zip share price is Citi. As my Fool colleagues covered earlier today, Citi has recently cut its 12-month price target for Zip shares by 6% to $10.25.

Even so, that price target implies a potential upside of almost 24% on the current Zip share price. Citi noted that customer attention for BNPL platforms, including Zip's, increased over the month of June. However, it has its eye on Zip's US QuadPay business which had a more subdued month.

At the current Zip share price, the company has a market capitalisation of $4.65 billion.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended 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.

More on BNPL shares

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
BNPL shares

Shares sold: Why Zip is under fire from its own shareholders

Some Zip investors had their shares sold without their knowledge.

Read more »

Sad woman with her hand on her head and holding a credit card.
BNPL shares

Zip share price tumbles 9% despite explosive first-half growth

Zip had a strong half and delivered a big improvement in key metrics.

Read more »

A businesswoman angrily throws her papers into the air.
Earnings Results

How is the Block share price rocketing 17% on Friday?

ASX 200 investors are sending the Block share price flying higher today.

Read more »

woman using affirm to pay
Mergers & Acquisitions

Zip share price rises as investors buy now on takeover talk

Investors are buying now on rumours of a takeover payoff later.

Read more »

A woman sits on a chair smiling as she shops online.
BNPL shares

Zip share price surges 7% on quarterly cash flow report

The buy now, pay later provider improved its cash position by $43 million over the December quarter.

Read more »

woman using affirm to pay
BNPL shares

The Zip share price has soared 147% in 3 months, can it keep going?

This stock has been zooming higher. Is it time to buy?

Read more »

Happy couple doing online shopping.
BNPL shares

Zip shares rocket 17% on 'outstanding' quarter

Investors have responded very positively to Zip's update this morning.

Read more »

A businessman carrying a briefcase looks at a square peg or block sinking into a round hole.
BNPL shares

Why is the Block share price getting hammered on Wednesday?

ASX 200 BNPL stock Block is down more than 6% in Wednesday trade.

Read more »