What does the future look like for the Zip (ASX:Z1P) share price?

Where does the BNPL company’s share price go from here?

| More on:
woman thing about her payment

Image source: Getty Images

The Zip Co Ltd (ASX: Z1P) share price has had a rollercoaster year thus far.

Shares in the buy now, pay later (BNPL) provider started the year at around $5.40. By mid-February, they had rocketed to an all-time high of $14.53.

Since then, the company’s shares have been harshly sold-off by investors and are currently trading in the $7 range.

Let’s take a look at what’s been moving the Zip share price and where it goes from here.

Afterpay takeover fueling Zip share price

Zip has had a strong start to the month, surging by more than 14%.

The bullish price action is largely due to the recent news from BNPL market leader Afterpay Ltd (ASX: APT). Earlier this week, it was revealed that US financial payments company Square Inc (NYSE: SQ) had offered a $39 billion takeover offer for the BNPL behemoth.  

As a result, the BNPL sector as a whole has been on fire since the news. The Zip share price has been a key beneficiary from renewed interest in the sector.

Potential takeover target?

Afterpay’s purchase offer has also heightened investor expectations that Zip could be a potential takeover target.

Most recently, Swedish-backed BNPL provided Klarna increased its stake in Zip. Klarna, which is also part-owned by the Commonwealth Bank of Australia (ASX: CBA), reportedly took a 4% stake in Zip to consolidate its market share.

As the second-largest BNPL operator in Australia, shares in Zip have received extra attention following the company’s expanding international presence.

Neither Zip nor Klarna have responded to the speculation.

Outlook for the Zip share price

Recently, a note from Citi highlighted a buy rating on Zip shares, with the broker initiating an $8.90 price target.

According to analysts, the acquisition of Afterpay could increase the takeover appeal in Zip.

In addition, the outlook for Zip is also dependant on how it has performed for the financial year.

In its most recent quarterly update, Zip flagged a 116% year on year increase in quarterly total transaction volume (TTV) to $1.8 billion.

In addition, the company reported a 104% increase in quarterly revenue to $129.9 million.

Currently, there is no published date on when Zip will report its results for the full year.

The Zip share price closed yesterday’s trading session at $7.57.

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 over 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 January 13th 2022

Motley Fool contributor Nikhil Gangaram 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, Square, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. 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