Why did the Zip share price crash more than 50% in June?

Zip shares were sold off again in June…

| More on:
Man open mouthed looking shocked while holding betting slip

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

  • Zip shares were the worst performers on the ASX 200 last month
  • The BNPL provider lost over 50% of its value during the month
  • There were a number of reasons for this decline

It certainly was a month to forget for the Zip Co Ltd (ASX: ZIP) share price in June.

Over the 30 days, the ASX buy now, pay later (BNPL) provider’s shares lost a massive 52% of their value.

This made the Zip share price the worst performer on the ASX 200 index last month.

It also means the company’s shares are were 90% since the start of the year.

Why did the Zip share price crash in June?

The Zip share price came under significant selling pressure last month for a number of reasons.

One of those came early in the month when tech giant Apple announced the launch of its BNPL service.

Apple’s BNPL service works with any merchant that already supports Apple Pay and does not require a new payments terminal. Furthermore, consumers can use the service even if the merchant doesn’t actively offer BNPL.

What else?

In addition to this increasing competition, the Zip share price came under pressure amid broad weakness in the tech sector last month. This saw the S&P ASX All Technology Index (ASX: XTX) lose more than 10% of its value during the period.

This weakness was caused by concerns over rising rates, which has led to a derating of growth stocks, recession fears, and the tough consumer environment. Investors appear to believe that these are the ingredients for a spike in bad debts.

Though, it is worth noting that Zip put out a business update last month which stated that its underlying business remains strong, with growth in customer numbers and transaction volumes. Management also stressed that it was focusing on driving its credit losses below the 2% threshold of total transaction volumes (TTV).

However, this was not enough to keep many investors on board, as you can see from the abject performance by the Zip share price. The remaining shareholders will no doubt be hoping for better in July.

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 positions in and has recommended ZIPCOLTD FPO. 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.

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 »