Why the Zip (ASX:Z1P) share price is down 10% on Wednesday

Zip’s the name and volatility is the game. Today is yet another hectic day for the BNPL player.

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The rollercoaster ride for the Zip Co Ltd (ASX: Z1P) share price continues on Wednesday, tumbling 9.2% to $7.50.

What’s driving the Zip share price selloff?

Investors might be selling their Zip shares today in response to another giant entering the buy now pay later (BNPL) space.

This morning, Bloomberg reported that Apple is working on a new BNPL service with classic interest-free instalment features.

The report said that Apple will be teaming up with another behemoth, Goldman Sachs, to act as the lender for the BNPL loans.

While Zip might be the second-largest ASX-listed BNPL player, it pales in comparison to the US$2.4 trillion giant that is Apple.

The broader BNPL sector is also feeling the pressure, with the likes of Afterpay Ltd (ASX: APT) and Sezzle Inc (ASX: SZL) sliding 8.8% and 9.13% respectively.

Whipsaw-like action for Zip

The Zip share price has displayed immense volatility in the last month.

Looking back, the broader BNPL sector bounced back in late June, with the Zip share price closing at a 2-month high of $8.78 on 24 June.

By 6 July, Zip shares had tumbled 17.5% to $7.25.

Just as things began to look bearish for Zip, rumours emerged that a rival BNPL provider had acquired a strategic stake in the company.

According to the Australian Financial Review, Swedish based rival Klarna acquired a 4% stake in Zip.

The report suggests this move was “designed to give it options should the buy now, pay later sector consolidate down to two or three main players globally”.

These rumours sent the Zip share price surging back to 2-month highs of $8.88 by 9 July.

Today, the Zip share price has tumbled back to $7.50 at the time of writing.

For investors who purchased Zip shares in late January or May, this would mean returns have slipped back to square one.

Should you invest $1,000 in Zip right now?

Before you consider Zip, you'll want to hear this.

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*Returns as of August 16th 2021

Motley Fool contributor Kerry Sun 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 AFTERPAY T FPO, Apple, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Apple. 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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