It certainly was a year to forget for the Zip Co Ltd (ASX: ZIP) share price and its shareholders.
During the 12 months, the buy now pay later (BNPL) provider's shares lost a whopping 88% of their value after falling from $4.33 to a lowly 51 cents.
Why did the Zip share price crash?
Investors were selling down the Zip share price last year amid broad weakness in the tech sector and concerns over the company's future.
The former was driven by aggressive interest rate hikes from central banks across the world to combat inflation. This put significant pressure on the valuations of tech shares and particularly loss-making ones.
And boy, is Zip a loss-maker! In August, the company released its full year results and revealed a loss of $1.1 billion.
While the majority of this loss was non-cash – an $821.1 million impairment of goodwill and intangibles – Zip still recorded an adjusted loss before income tax of $256.5 million for FY 2022.
In addition, concerns that rising interest rates could cause bad debts to spike also weighed on its shares. And although Zip has adjusted its credit risk settings in an attempt to offset this, there are fears that it could stifle its growth.
Particularly given the increasing competition in the BNPL market. This includes the arrival of tech giant Apple in the space with 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.
Will 2023 be better?
The performance of the Zip share price over the next 12 months is likely to be impacted largely by the company's profitability goals.
Management is aiming for cash EBTDA profitability in FY 2024. If it can demonstrate that it is on track to achieve this, then it could bode well for the company's shares.
However, conversely, if the tough economic environment pushes back its profitability timeframe, it could have major consequences for the Zip share price. Particularly given its cash burn and high debt load.
All in all, it certainly will be an interesting year for the company.
