Here’s why the Zip (ASX:Z1P) share price is rocketing 8%

The afterglow of the Afterpay deal is shining on Zip. Here are the details

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The Zip Co Ltd (ASX: Z1P) share price is off to a flying start today. At the time of writing, shares in the buy now, pay later (BNPL) provider are trading for $7.88 – up 8.84%.

Much like yesterday, Zip is following on from its BNPL compatriot Afterpay Ltd’s (ASX: APT) success in intraday trading.

The Afterpay share price is currently $129.00. That’s an incredible 12.4% higher today and 33.5% greater over the last 2 days.

As many are well aware, Afterpay is in the midst of a takeover bid by Square Inc (NYSE: SQ). Shares in square have risen 10% overnight and since Square will be acquiring Afterpay shares through scrip, it has increased the value of its bid for the Aussie BNPL leader.

Zip will become an Aussie BNPL leader

As Motley Fool has reported, once Square acquires Afterpay, Zip will be the largest BNPL provider on the ASX by market capitalisation. This may be another reason for the rising Zip share price.

Square will establish a secondary listing on the ASX via CHESS depository interests (CDIs) for the thousands of its new Aussie shareholders. It, however, is not exclusively a BNPL provider. The same applies to the Commonwealth Bank of Australia (ASX: CBA), which will launch its own BNPL service soon.

Competition in the sector is heating up. While there are the established players like Zip, Afterpay, and Sezzle Inc (ASX: SZL), among others, news recently broke that Paypal Holdings Inc (NASDAQ: PYPL) and Apple Inc (NASDAQ: AAPL) have entered, or will soon enter, the BNPL market.

The Zip share price fell on the news of Apple and PayPal entering the market, as did the rest of the BNPL sector.

Zip share price snapshot

One can see the volatile ride the Zip share price has gone on over the last year or so.

Over 6 months its share price is down 1.15% but year-to-date it’s up an incredible 39%. Over 12 months, the share price is up slightly less – 34%.

Zip’s 52-week, and all-time high, is $14.53. The current share price is about 45% lower than this milestone achievement.

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

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

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Zip wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Apple, PayPal Holdings, Square, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $75 calls on PayPal Holdings, 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 and PayPal Holdings. 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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