The falling Zip Co Ltd (ASX: ZIP) share price has likely left many investors disappointed in its wake.
After riding the 'buy now pay later (BNPL) wave' alongside former market darling Afterpay, Zip shares hit an all-time high of $14.53 apiece in February 2021. But the stock has plummeted to multiyear lows in recent weeks.
At the time of writing, the Zip share price is 89 cents. That's 80% lower than it was at the start of this year.
Its fall has likely left a sour taste in the mouths of many market participants, so what's kept investors holding on?
Let's look at what could be kindling shareholders' hopes for the S&P/ASX 200 Index (ASX: XJO) BNPL giant.
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Zip share price dragged down by bad debts
Zip chair Diane Smith-Gander has reportedly echoed the company's co-founder and CEO Larry Diamond, saying concerns of bad debts have weighed on the Zip share price.
Smith-Gander admitted the BNPL industry missed economic cues that could have seen bad debts limited. But hope for the future is rife among the pair and is potentially keeping the market focused on the stock.
Smith-Gander told a conference that Zip will be working to "dig [its] way out" of the BNPL industry's bad debt challenge, as reported by The Age.
She also noted that hopeful investors are "seeing through the cycle [and] looking to the future".
Smith-Gander reportedly said:
In the industry there was a bit of a feeling that well these are small amounts of money, so the payback for recovery and collection activity is not the same as if you're collecting mortgage that's gone bad.
I refute all of that because I think we use technology and you are able to be much clearer about what your book is like.
Diamond outlined the company's plan to move past the bad debt conundrum earlier this year. It has begun to limit risky debts by restricting credit available to first-time customers and that for existing customers.
"I wish all of you who have the intestinal fortitude to be involved in tech stock investing the very best of luck," Smith-Gander was quoted by The Age as saying.
What's keeping Zip fans holding on?
Despite the stock's downturn – which Diamond previously called "violent and vicious" – there appears to be hope among Zip investors.
"[W]e are having some very tough times in the market," Smith-Gander reportedly admitted.
But the BNPL giant is working to become cash flow positive across its range of businesses.
It's already cash flow positive in Australia. The business is also growing in the United States following its rebranding of QuadPay.
It's also successfully marked the credit industry with its own stamp, disrupting the credit card model to do so.
Still, according to its most recent quarterly update, Zip's credit losses were still worsening.
Thus, those holding onto Zip shares might demonstrate both "intestinal fortitude" and a notable degree of either hope or wishful thinking.
Or, they simply might not be ready to cut their losses yet.
