Zip shares hit new multi-year low. What’s going on?

Zip shares have been hit hard in recent times…

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Zip share price Z1P A wide-eyed man peers out from a small gap in his black zipped jumper conveying fear over the weak Zip share price

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Key points

  • Zip shares fall 3.57% to $1.35 after hitting a multi-year low of $1.34 earlier today 
  • A number of factors outside Zip's control have led to a recent downturn in its shares 
  • In 2022, Zip shares are down by almost 70% 

The Zip Co Ltd (ASX: Z1P) share price hit a fresh multi-year low during early morning trade.

From reaching an all-time high of $14.53 in February 2021, its shares bottomed out to a low of $1.34 today. This represents a decline of more than 90% in a period of around 14 months.

The buy-now pay-later (BNPL) company’s shares have struggled to gain composure since the start of 2021.

At the time of writing, the Zip share price is swapping hands for $1.35, down 3.57%.

What dragging Zip shares down lately?

Investors have continued to sell off Zip shares following negative sentiment across the tech industry.

A selloff in bonds caused the 10-year treasury yield to hit its highest level since 2018. This is being driven by high inflation, a tightening monetary policy and the COVID-19 outbreak in China.

In the past week, the heavily-tech focused Nasdaq has lost about 7.3% in value. When looking since the beginning of the year, the index is down 15%.

This has had an adverse effect on the S&P/ASX All Technology Index (ASX: XTX), down 5.19% in a week, and 20% for 2022.

Inflationary issues have not helped the cause, with the United States experiencing the biggest rise in 40 years.

Australia has been experiencing its own inflation problems, rising 3.5% in the last quarter of 2021 alone. This was being blamed on high levels of building construction activity combined with shortages of materials and labour, as well as record automotive fuel prices.

The Reserve Bank of Australia signalled two rate hikes for 2022 in an effort to slow down the rising price of goods.

What this means is that consumers are less likely to spend on discretionary items when interest rates are picking up. The cost of debt such as credit cards as well as personal loans will require extra payments, affecting consumer spending habits.

Unfortunately for Zip, this is the heart of its business model, in the BNPL sector.

Zip share price summary

Over the past twelve months, the Zip share price has fallen by more than 80%, with year to date down almost 70%.

Based on the current Zip share price, the company has a market capitalisation of approximately $921.68 million.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns 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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