Why are Zip shares hitting a new multi-year low on Friday?

It's a bad day for Zip shareholders today, with the BNPL company's shares trading at their lowest level since February 2016.

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Zip Co Ltd (ASX: ZIP) shares are trading at their lowest level since February 2016.

Zip shares hit an intraday trough of 36 cents today, a 5.3% dip from yesterday's close.

What's dragging Zip shares down?

It's possible that Zip shares are following Wall Street's lead on Friday.

The major United States buy now, pay later (BNPL) shares all fell overnight.

Block Inc shares dropped 2.42%, PayPal shares were down 1.81%, and Affirm stock fell 1.04%.

Among the ASX-listed BNPL stocks today:

As my Fool colleague Mitch theorised yesterday, Zip shares may be falling this week due to macroeconomic headwinds, including a slight uptick in unemployment and softening consumer spending.

The Australian Bureau of Statistics revealed the unemployment rate rose to 3.7% in July this week. This equates to approximately 14,000 jobs vanishing in July, indicating higher interest rates are taking effect.

Other recent data shows a third consecutive month of reduced discretionary spending in June.

What's next for Zip shares?

In its 4Q FY23 update, Zip said it was on track to deliver its key goal of group-positive cash flow in 1H FY24.

This is in line with its company strategy to abandon ambitious global growth plans and focus on achieving profitability instead as a smaller company.

In its update, Zip said:

As at 30 June 2023, Zip had available cash and liquidity of $57.3m. Zip remains well funded with sufficient available cash and liquidity to support the company to achieve group cash EBTDA profitability during H1 FY24.

Zip will report its full-year FY23 results on 29 August.

Motley Fool contributor Bronwyn Allen has positions in Zip Co. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Affirm, Block, PayPal, and Zip Co. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: short September 2023 $67.50 puts on PayPal. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool Australia has recommended Humm Group and PayPal. 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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