The Sezzle Inc (ASX: SZL) share price has tumbled 60% over a week, but one broker reportedly believes it's nowhere near bottoming out.
The buy now, pay later (BNPL) stock's suffering was exacerbated by the mutual decision to dump its planned multi-million merger with Zip Co Ltd (ASX: ZIP) on Tuesday.
As of yesterday's close, the Sezzle share price is trading at just 20 cents. That's down from nearly $8 this time last year.
And one previously bullish broker has reportedly turned its back on the stock following its recent poor performance, slapping it with a price target of just 1 cent.
So, what seems to have spurred the expert's cynicism? Let's take a look.
Could the Sezzle share price plummet to 1 cent?
RBC has apparently taken an axe to its price target for Sezzle shares. It's slashed it to a measly 1 cent in the aftermath of the termination of the company's planned merger, the Australian Financial Review (AFR) reports.
Making the matter more dramatic, the same broker was said to have previously tipped Sezzle's shares to reach $12. It has also reportedly abandoned its coverage of the BNPL stock.
According to the publication, RBC is doubtful Sezzle can bring in enough cash or raise capital. RBC noted, courtesy of the AFR:
Underperformance has been driven by expected increases in funding costs, bad debts, and general market reluctance to support cash-flow negative, growth businesses.
Additionally, Sezzle's cash burn also reportedly worried the expert. In its latest quarterly results, the company had US$58.4 million in the bank, having burnt through U$18.3 million in the March quarter. RBC was quoted by the AFR as saying:
This implies under 12 months of cash burn including [Sezzle's] US$11 million termination fee from [Zip] but before factoring in higher funding costs and a turning credit cycle.
On that note, the broker is said to believe that the merger's cancellation highlights a deteriorating operating environment or fewer-than-expected synergistic benefits.
Zip told the market the merger's termination was "in light of current macroeconomic and market conditions".
The Sezzle share price has plunged 93% since the start of 2022. It's also trading 97% lower than it was this time last year.
