The Zip Co Ltd (ASX: Z1P) share price was out of form on Monday.
The buy now pay later (BNPL) provider's shares dropped 1% to $8.23.
Why did the Zip share price drop?
The weakness in the Zip share price on Monday appears to have been driven by the release of a mixed broker note out of Citi.
Although the broker has retained its buy rating on the company's shares, it has cut its price target down by 6% to $10.25. It made the move to reflect a weaker than expected performance in June.
Nevertheless, based on the current Zip share price, this downgraded price target still implies potential upside of almost 25% over the next 12 months.
What did Citi say?
According to the note, the broker's industry research shows that most BNPL players achieved improvements in website visits and app downloads in June.
However, it estimates that Zip's key QuadPay business had a relatively subdued month, with website visits falling 4% month on month and app downloads increasing by a modest 3%. Citi expects this to lead to new customer additions of 600,000 during the fourth quarter.
In addition to this, the broker is expecting Zip's costs to increase and has lowered its cash earnings estimates notably to reflect this.
What about Afterpay?
Citi still prefers Zip over Afterpay Ltd (ASX: APT).
The note reveals that the broker has retained its neutral rating and trimmed its price target on Afterpay's shares to $125.00.
While Afterpay had a comparatively stronger month in June, with app downloads increasing 12%, Citi has warned that this may not be from new users.
The broker suspects that a good number of these downloads could be from existing customers that have been encouraged to download the app via in-app promotions. As a result, the broker has lowered its US active customer forecast to 10.5 million at the end of FY 2021.
So with the Afterpay share price trading at $118.64, it hasn't seen enough to warrant a change to its neutral rating at this point.
