Why did the Zip (ASX:Z1P) share price tumble 12% in July?

This BNPL provider’s shares were out of form in July…

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It certainly was an eventful month for the Zip Co Ltd (ASX: Z1P) share price in July.

The buy now pay later (BNPL) provider’s shares were up as much as 16% month to date on 8 July before giving back all of this and more.

The Zip share price ultimately ended the period with a monthly decline of 12.3%.

Why did the Zip share price tumble lower last month?

There were a couple of catalysts for the weakness in the Zip share price in July.

One of those was concerns about increasing competition in the BNPL market. This follows news that PayPal is removing late fees from its BNPL service and rumours that Apple is entering the market.

In respect to the latter, Bloomberg reported that Apple is planning to disrupt the BNPL market with the launch of Apple Pay Later in the near future. This is believed to be part of the company’s plan to increase transaction volumes through Apple Pay, boosting its US$50 billion Services business.

There are fears that Apple’s entry could steal customers away from Zip and its QuadPay business, putting pressure on growth rates in the coming years.

What else weighed on its shares?

Also weighing on the Zip share price was the release of its fourth quarter results.

Zip delivered another record performance, reporting a 116% year on year increase in quarterly total transaction volume (TTV) to $1.8 billion and a 104% increase in quarterly revenue to $129.9 million. Positively, this was driven by record monthly revenue of $44.8 million in June, which annualises at $537.2 million.

Once again, its US-based QuadPay business was the key driver of its growth during the quarter. It reported a 107% year on year increase in revenue to $64.3 million. This was supported by a 39% lift in revenue in the ANZ and a modest contribution by its fledgling UK business.

Given that this was largely in line with the market’s expectations, investors may be wondering about the weakness in the Zip share price following its release.

That has been attributed to the fact that management didn’t comment on takeover speculation. This followed reports that rival Klarna has been building up a position in the company.

If these rumours are true, Klarna will no doubt be licking its lips at the pullback in the Zip share price in July. But time will tell if the reports amount to anything.

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Motley Fool contributor James Mickleboro 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.

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