How did the Zip share price respond last time the company reported?

How did the Zip share price react following the company's half-year results?

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Key points
  • Zip shares fell 6.12% to 92 cents at market close yesterday, continuing their gradual fall throughout the year
  • Since the company's half-year results, Zip shares are now down 58%
  • Investors will be keeping a close eye on the company's upcoming FY 2022 results, which are set to be released this Thursday

The Zip Co Ltd (ASX: ZIP) share price has tumbled 58% since the company delivered its half-year results to the market.

The ASX buy now, pay later (BNPL) provider has been through a challenging year impacted by unfavourable market conditions. This includes potential regulatory headwinds and rising bad debts due to strong inflationary movements.

At Tuesday's market close, Zip shares finished 6.12% lower at 92 cents.

Below, we take a closer look to see if investors can learn anything from the company's last earnings season.

A man rests his chin in his hands, pondering what is the answer?

Image source: Getty Images

What happened in the first half of FY 2022?

Investors weren't able to trade Zip shares on 28 February as the company requested a trading halt following its half-year results.

Zip explained that it signed an agreement to acquire rival BNPL provider Sezzle Inc (ASX: SZL) for approximately $491 million.

In addition, Zip undertook a $198.7 million capital raise to "support its growth and execute on the potential synergies from the transaction".

The trading halt came in a timely manner as the company reported widening losses on the bottom line, despite operating income almost doubling.

Zip co-founder and global CEO Larry Diamond said:

We acknowledge there has been a shift in the external environment, arguably quicker and more severe than first forecasted. Accordingly, we have refined our strategy with a focus on sustainable growth in our core markets, maintaining strong unit economics – particularly credit performance, broader cost management, right-sizing our internal footprint, which accelerates our path to profitability.

Once the trading halt was lifted on 1 March, investors began to offload Zip shares.

In fact, from 28 February to 15 March, the Zip share price tanked 36% to a 52-week low, before taking a slight breather.

Eventually, Zip shares hit a multi-year low of 43.5 cents in late June on the back of extreme volatility on the ASX.

There has been a small rebound in the past couple of months. But whether the Zip share price can regain its previous highs depends on the company's upcoming results.

No doubt, investors will be eagerly waiting for the release of Zip's full-year results on Thursday.

Zip share price snapshot

As pressure mounts on the BNPL industry, the Zip share price has not been immune – falling almost 90% over the past 12 months.

This means its shares would need to climb 900% to break even from this time last year.

Based on the current price, Zip presides a market capitalisation of around $633 million.

Motley Fool contributor Aaron Teboneras 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.

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