The Zip Co Ltd (ASX: ZIP) share price is up 2.79% in early trade after gaining 2.3% yesterday.
Traders in the ASX buy now, pay later (BNPL) share have certainly had the opportunity to capitalise on some big swings in the Zip share price.
Traders astute – and lucky – enough to have bought shares on 30 June and sold a month later on 28 July would have made an eye-popping 245% gain.
On the flip side, anyone who bought shares on 28 July and still holding them today will be nursing a painful loss of 41%.
That's the kind of volatility you might normally expect investing in cryptos.
Anyhow, that's the short-term picture.
For long-term investors ignoring the sharp peaks and troughs, the Zip share price has inexorably retreated from its February 2021 all-time highs.
Even with shares still up 103% from the recent 28 June lows, the current share price is still down 30% from its post-pandemic selloff low on 20 March 2020. And it's down 87% since this time last year.
Which is why Christopher Watt of Bell Potter Securities reckons investing in the former BNPL darling is like trying to catch a falling knife.
Zip share price susceptible to competition and regulation
As reported by The Bull, Watt has a sell recommendation for Zip shares.
According to Watt:
This buy now, pay later company reported a net loss of $1.1 billion in fiscal year 2022. Reducing cash burn is part of the company's strategy. The company has decided to close its operations in Singapore and the UK. The company is winding down non-core products. We view the BNPL sector as highly competitive and susceptible to further regulation.
Bad debts and rising rates
The $1.1 billion loss from ordinary activities after income tax Watt mentions was a 63% increase from the losses reported in fiscal year 2021. And that came despite the company reporting record revenue of $620 million, up 57% from FY21.
Atop these alarming figures, and the cautions Watt notes above, the Zip share price has come under increased pressure this year from fast-rising interest rates. That could see the company continue to struggle with getting their customers to pay back those handy interest-free, instalment loans.
In FY22, Zip already reported a 110% increase in bad debts and expected credit losses, which reached a staggering $276.1 million over the 12 months.
