It’s happened: Zip share price tumbles below $1 for first time since 2018

ZIP shares have fallen below the psychological $1 barrier.

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a boy with sad eyes pulls the zip over his mouth and nose while doing up a large jacket where the collar stands up at head height.

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Key points

  • Zip shares touch a multi-year low of 97 cents before slightly recouping its losses 
  • Strong falls across Wall Street in the past week have impacted the ASX, namely the tech space 
  • Fears over a global economic slowdown due to interest rate hikes are playing a significant hand 

What a rollercoaster year it has been for the Zip Co Ltd (ASX: ZIP) share price.

From reaching an all-time high of $14.53 around 12 months ago to bottoming out to a multi-year low of 97 cents today.

To save you doing the math, that represents a fall of almost 94% if you invested at the peak. This means the Zip share price will need to rocket more than 900% to recover from the above losses.

Although the buy-now-pay-later (BNPL) company’s shares have staged a mini comeback in the last hour, they are still 75% down compared to pre-pandemic levels.

What’s going on with Zip shares?

At the time of writing, Zip shares are down by 2.45% to 99.5 cents following turmoil across global markets.

The age-old saying, “When America sneezes, Australia catches a cold” couldn’t be more right.

Over the last few days, Wall Street losses have heavily impacted the ASX. The S&P/ASX 200 Index (ASX: XJO) is down over 5% for the past week alone.

Investors have pulled out of their investments over fears about rate hikes kicking off a global economic slowdown.

In particular, the S&P/ASX All Technology Index (ASX: XTX) has been hit hard, down roughly 10% since this time last week.

This has also put a squeeze on other BNPL companies such as mobile payment provider Block Inc CDI (ASX: SQ2)Splitit Payments Ltd (ASX: SPT), and Humm Group Ltd (ASX: HUM).

The Reserve Bank of Australia (RBA) lifted its official cash rate by 0.25% earlier this month.

Notably, this is the first time the RBA has increased its rates since the Julia Gillard era in November 2010.

While the official cash rate stands at 0.35%, it is widely expected there will be further rate hikes to come.

The RBA is using its tools to curb inflation which has risen 5.1% on an annualised basis.

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.

Zip share price summary

Over the past 12 months, the Zip share price is down 87%. Year to date, it’s also tumbled by around 77%.

Based on the current Zip share price, the company has a market capitalisation of around $715 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. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool Australia has recommended Humm Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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