When will it end? Zip share price plummets again on Tuesday

ASX BNPL shares have been widely sold off as investors eye a mid-term future with higher interest rates.

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Key points
  • The Zip share price is tumbling towards yet another multi-year low
  • ASX BNPL shares are under pressure amid higher inflation and rising interest rates
  • Investors are likely selling today with the RBA’s afternoon rate decision in mind

The Zip Co Ltd (ASX: ZIP) share price is sliding.

Again.

Shareholder faith is certainly being tested with dip buyers taking a bath as the Zip share price is down 9.8% in early afternoon trade.

Zip shares closed yesterday at 77 cents apiece and are currently trading for 69 cents.

Man in business suit above the clouds plummeting downwards back first

Image source: Getty Images

What's going on with the Zip share price?

The buy now, pay later provider (BNPL) has come under sustained selling pressure since hitting all-time highs of $12.35 on 19 February last year.

Since that milestone, the Zip share price has collapsed 94.1%. It is also down 90% over the past year.

Buy the dip buyers aren't feeling the joy, with Zip shares now posting six consecutive days of losses. Barring a miraculous turnaround in afternoon trading, the company will end the day at its ninth multi-year low in the past month alone.

In fact, you have to go back to December 2017 to find Zip shares at a lower price than today.

But they are not the only BNPL company struggling.

Why are BNPL shares selling off?

The wider BNPL sector has come under intense selling pressure over the past 12 months.

Sezzle Inc (ASX: SZL) shares, for example, are down 95% over that time, while industry giant Block Inc (ASX: SQ2) – owner of Afterpay – is down 36% over the 12 months.

The companies have all faced stiff headwinds from fast-rising inflation and the resulting interest rate rises.

Many, including Zip, have also seen their bad debts increase. Some analysts say the BNPL companies have not done enough to ensure that clients taking out small installment loans for purchases will be able to make those repayments.

And news out that global technology giant Apple Inc (NASDAQ: AAPL) is moving forward with its BNPL offering, Apple Pay Later, looks to be throwing up additional headwinds today. Apple said its offering comes with no interest rates and no late fees. It will work for any merchants that already accept Apple Pay.

With the Reserve Bank of Australia (RBA) flagged to most likely hike the official cash rate again today, you can see why the Zip share price is again deep in the red.

Shares are likely to remain under pressure until central banks begin easing back on the current monetary tightening cycle.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool Australia has recommended Apple Inc. 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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