The Zip (ASX:Z1P) share price is down 10% in a week. Here’s why

Short-sellers have looked to capitalise on Zip’s uncertain outlook.

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The past week has not been kind to the Zip Co Ltd (ASX: Z1P) share price.

After closing yesterday’s session at $6.24, shares in the buy now, pay later company have tumbled more than 10% in the past week.

So, what’s been weighing down the Zip share price?

What’s been dragging Zip shares lower this past week?

Weakness in Zip’s share price in the past week can be traced back to the company’s Retail Investor Day.

Despite providing the market with promising product updates, the BNPL player failed to provide an update on its performance so far in FY22.

Zip has been plagued by speculation that its rebrand in the US has slowed momentum and growth.

As a result, concerned investors were left in the lurch as the company revealed a number of new products.

Various brokers and analysts have also expressed these concerns.

Macquarie recently released a bearish note that gave the Zip share price an underperform rating and a reduced price target of $5.70.

Analysts cited concerns over the company’s elevated bad debts, slowing customer growth, and softer web traffic.

As a result, short-sellers have looked to capitalise on Zip’s uncertain outlook.

According to the most recent data, Zip’s share registry has a 9.2% short interest.

Besides struggling this past week, the Zip share price has slid since releasing its full-year results.

How did Zip perform in FY21?

Zip noted FY21 as a transformational year, with the company recording a 150% increase in revenue of $403.2 million.

Other highlights from the company’s full-year report included:

  • Transaction volumes of $5,8 billion, up 178.5%
  • Transaction numbers of 41.3 million, up 293%
  • Active customers at 7.3 million, up 247.5%
  • Active merchants at 51,300, up 109.4%
  • Cash gross profit of $198 million, up 147%

In addition to new merchants, the BNPL player also expanded to 12 new international markets in FY21.

Despite its strong growth results, Zip shares fell 2.6% on the day the company reported, as growth concerns emerged.

Snapshot of the Zip share price

Zip shares have not only struggled this week. Shares in the BNPL player have also underperformed the tech sector in the last year.

In the past 12 months, the  S&P/ASX All Technology Index (ASX: XTX) has risen around 33%.   

By comparison, the Zip share price is flat over the same timeframe.

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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 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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