Shares in Zip Co Ltd (ASX: Z1P) have weakened in 2022 and are now trading at 52-week lows as trading resumes this week.
With a 71% loss this year to date, it's no wonder why investors are shying away from the BNPL sector and shunning names like Zip.
More bad news to come for the Zip share price?
Not helping the situation is newly-acquired Block – nee Afterpay – reporting extensive losses in its interim results last week.
Bought on a hefty sum of $39 billion (Australia's largest ever public buyout), Block's share price fell immediately after the purchase.
Zip then purchased BNPL peer Sezzle Inc (ASX: SZL) a short time afterwards, albeit at a shave of the price.
In 2022 cash earnings are becoming more important than ever, and from its consolidated statement of income, Afterpay printed a pre-tax loss of $502 million for the half year to 31 December 2021 – no improvement from a circa. $76 million loss last year.
Analysts at Macquarie have become less constructive on the sector and have noticed some shifting trends amongst consumers.
It believes there are "red flag[s] for the BNPL industry" based on its assessment of website visits – a key driver of growth, analysts say.
"This is the first time we've seen negative growth since tracking the data series," it wrote in a recent note to clients.
"We consider BNPL more of a customer acquisition tool, and in the case of declining customer numbers the value of BNPL diminishes."
Macquarie values Zip at $1.85 and urges its clients to sell, alongside 45% of coverage, according to Bloomberg data.
Its average price target is $2.95, however, helped by bullish positions from Ord Minnett and Jarden valuing Zip at $4 and $5.75 apiece respectively.
Hence the sentiment appears mixed amongst those analysts covering the company. But either way, Zip has a long way to go before its share price returns to former highs.
In the last 12 months, the Zip share price has fallen more than 86% into the red.
