It has been another disappointing day for the Zip Co Ltd (ASX: Z1P) share price.
On Thursday, the buy now pay later (BNPL) provider's shares tumbled to a new 52-week low of $2.64.
This latest decline means the Zip share price is now down almost 80% over the last 12 months.
What's going on with the Zip share price?
Investors have been selling down the Zip share price amid weakness in the tech sector (and particularly in the BNPL category).
In addition, there are concerns that near term trading conditions could be challenging. These concerns heightened following the release of PayPal's recent quarterly update. A note out of Citi highlights the latter.
Citi commented: "PayPal's commentary [was] in-line with our view that near-term conditions are challenging with PayPal calling out a weaker than expected start to 2022 due to slower ecommerce, pull back in spending by lower-income consumers and strong comps."
In light of this, Citi has warned that Zip's third quarter update could be weaker than the market is expecting. The broker also highlights that there is a danger than bad debts could worsen in the US due to inflationary pressures and unwinding stimulus.
It added: "We see potential for Zip's 3Q update to be weaker than expected (we are -3% below IBES consensus revenue for FY22e). From a bad debt/credit quality perspective, Sezzle's recent quarterly update does suggest that credit quality in the US is stable, however one factor to consider is whether higher inflation and unwind of stimulus could impact Zip's US bad debts in 2H22e."
Can its shares keep falling?
While it is impossible to say whether the Zip share price will keep falling, it is worth noting that even bearish analysts have price targets materially ahead of where it trades today.
For example, Macquarie has an underperform rating and $3.40 price target on its shares and Citi has a neutral rating and $3.65 price target. This implies potential upside of ~30% for investors.
