Is the Zip share price weakness a buying opportunity?

Is it time to buy Zip shares?

| More on:
A woman puts up her hands and looks confused while sitting at her computer.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Zip share price was sold off last week following the release of the BNPL provider's third quarter update
  • This means its shares are now down 75% since the start of the year
  • Is this a buying opportunity for investors?

It was another tough week for the Zip Co Ltd (ASX: ZIP) share price.

Investors were selling down the buy now pay later provider’s shares following the release of its third quarter update.

While that update revealed growth that most companies would be proud of, it still fell short of the market’s expectations.

This was compounded by the worsening of credit losses and concerns over lower frequency of use and the impact that its bold cost reduction plans could have on its growth.

The Zip share price ultimately ended the week 10% lower than where it started it at a lowly $1.10. This means its shares are now down almost 75% since the start of the year.

Is the weakness in the Zip share price a buying opportunity?

According to a note out of Citi at the end of last week, its analysts continue to sit on the fence with the Zip share price.

Although the broker acknowledges that Zip is pulling the right levers, it highlights that risks remain.

In light of this, the broker has put a neutral (high risk) rating and $2.15 price target on the company’s shares.

Citi commented: “While TTV growth was slower than expected and bad debts in AU increased qoq, on balance we see the 3Q update as positive with customer growth in the US accelerating in spite of tightening of risk settings, net transaction margins improving and Zip reducing costs faster than expected. “

“While stronger-than-expected growth on the back of Enterprise merchant additions represents upside potential, we are Neutral/High Risk (2H) rated as we are concerned about the potential for bad debts to remain elevated and the impact to top line growth from cost reduction measures.”

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

More on BNPL shares

A business woman looks unhappy while she flies a red flag at her laptop.
BNPL shares

Top broker warns that the Zip share price could sink 43%

Are Zip's shares heading lower from here?

Read more »

A corporate executive in a suit and wearing boxing gloves slumps in the corner of the ring representing the battered Zip share price and consideration reportedly being given to dumping the company's UK operations
BNPL shares

Does this signify more bad news for ASX BNPL shares like Zip?

An ASX bank just wrote down its BNPL investment by 85%...

Read more »

A woman holds up hands to compare two things with question marks above her hands.
BNPL shares

‘The environment has changed’: Can Block shares maintain growth AND profitability into 2023?

The ASX 200 BNPL share is scaling back its planned investments over the coming quarters by US$250 million to focus…

Read more »

Happy man doing online shopping.
BNPL shares

Did Zip really outgrow former ASX favourite Afterpay in the June quarter?

Zip appears to be growing in markets where Afterpay has struggled.

Read more »

A young man wearing glasses and a denim shirt sits at his desk and raises his fists and screams with delight as he watches the ResApp share price go 50% higher today
BNPL shares

Why is the Block share price charging 10% higher on Thursday?

What's going on with the digital payments company's shares today?

Read more »

A woman sits on a chair smiling as she shops online.
BNPL shares

Zooming higher: The Zip share price is up 7%

The BNPL sector is lighting the ASX up.

Read more »

a smiling woman sits at her computer at home with a coffee alongside her, as if pleased with her investments.
BNPL shares

Why is the Sezzle share price surging 8% on Wednesday?

The Sezzle share price is on the burn today along with the wider BNPL sector.

Read more »

People sit in rollercoaster seats with expressions of fear, terror and exhilaration as it goes into a steep downward descent representing the Novonix share price in FY22
BNPL shares

Up 10%, what’s going on with the Zip share price today?

It's been a rollercoaster for this ASX BNPL share in recent days, and today is no different.

Read more »