The Zip Co Ltd (ASX: ZIP) share price is cratering in morning trade on Thursday and now sits 7% lower at 53.5 cents.
Investors have pushed Zip lower today on no news. However, noteworthy is a bearish research note out of UBS today, highlighting growing concerns for the company.
In broad market moves, the S&P/ASX 200 Index (ASX: XJO) is rangebound today and is flat on the day at 6,597.
Sell now, sell later for the Zip share price
In contrast to its buy now, pay later (BNPL) business model, investors have adopted a sell at all costs mentality with Zip these past 12 months.
The share has been on a downward glide in that time and has shown no signs of reversing out of the downtrend.
It reached 52-week lows on 30 June and has been wiggling sideways up until today's trading.
Analysts at UBS have taken note of this and other risks in Zip's profile. The team have rated the share a sell and reduced its price target to 45 cents.
UBS has chosen to look at gross receivables to rate Zip's credit performance and estimate that the BNPL player's bad and doubtful debt (BDD) provisions are set to increase.
It reckons Zip has an annualised BDD expense of around 12.4% for this first half, up from 7.4% a year ago.
With Zip's arrears making up more of its receivables, the broker said it expects "credit quality to remain soft this half".
"In order for Zip to achieve profitability…[t]his will involve growing its receivables – which in our view means taking on more risk," it said.
"[Zip] needs to achieve revenue and cost synergies with Sezzle, an improvement in credit performance, and organic growth," it added.
