Why is the Zip share price down almost 25% in a month?

The BNPL company’s shares are continuing to dwindle…

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Key points

  • Zip shares are down 86% in 2022, after recording heavy losses in the past month
  • The company released its third-quarter results in late April, highlighting top-line growth, but this did not impress the market
  • Zip's widening credit losses have continued to weigh down investor sentiment

It’s been another turbulent month for the Zip Co Ltd (ASX: ZIP) share price, shedding 25% over the past four weeks.

At the close of trading on Tuesday, the buy now, pay later (BNPL) company’s shares were fetching 92 cents, down 3.16% for the day. This means its shares are trading at multi-year lows.

What’s been happening with Zip?

It’s been a hard pill to swallow for investors as they have watched their Zip holdings plummet in value.

The company reported top-line growth across its global operating markets for the third quarter of FY22 on April 21. However, its credit losses which increased over the quarter did not resonate well with shareholders.

During this time the company’s shares slumped for five consecutive trading days, amounting to a fall of almost 20%.

Furthermore, the ASX was heavily sold off earlier this month which continued the Zip share price onslaught.

The company acknowledged a shift in the external environment, arguably quicker and more severe than first forecasted.

In response, management refined its strategy but it is still too early to tell if this will pay off.

Not helping matters is the fall of the S&P/ASX All Technology Index (ASX: XTX), which has dropped 30% year to date.

Additionally, the Reserve Bank of Australia raising interest rates for the first time since 2010 doesn’t bode well for Zipsters.

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.

How has the Zip share price performed?

Following today’s losses, the Zip share price has dived 86% over the past 12 months.

It’s a long way from when the company’s shares reached an all-time high of $14.53 in early 2021.

Based on today’s prices, Zip presides a market capitalisation of approximately $628.85 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 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 Scott Phillips.

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