Has the Zip share price 'risen too rapidly'?

This expert is telling us to take Zip's profits off the table.

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If you haven't taken a look at the Zip Co Ltd (ASX: ZIP) share price recently, you might be in for a bit of a shock. Zip, the ASX buy now, pay later (BNPL) stock that took the ASX by storm a few years ago, had an exceptionally rough few years following its stunning 2020.

Since peaking at over $12 a share back in early 2021, investors have endured a precipitous collapse of capital. By mid-2022, the BNPL stock was under 50 cents a share, which was succeeded by a new 52-week low of just 26 cents a share in October 2023.

But ever since then, the Zip share price has staged a stunning recovery. At market close on Tuesday, Zip finished trading at $1.29 a share, up 7.53%. That came after the company hit $1.60 a share back in March.

As it stands today, Zip shareholders have enjoyed a 107.26% return year to date, as well as a gain of 157% over the past 12 months.

Check all of that out for yourself below:

This recovery for the Zip share price can be put down to a number of positive updates from the company.

Most recently, investors appear to have been buoyed by Zip's April quarterly update, which revealed a 14.6% rise in transaction volumes, as well as a 26.6% rise in quarterly revenues to $219.2 million.

So there would be more than a few Zip shareholders that would have welcomed these gains with gusto. However, one ASX expert is urging caution on the Zip share price moving forward.

ASX expert gives Zip share price a sell rating

As reported by The Bull, John Athanasiou of Red Leaf Securities has just issued the Zip share price with a 'sell' rating. Athanasiou doesn't like the look of what he sees in the BNPL stock right now. He cited valuation concerns and inflationary pressures in Zip's key markets for his negative view. Here's what Athanasiou had to say in full:

Revenue of $219.2 million in the third quarter of fiscal year 2024 was up 26.6 per cent on the prior corresponding period. The revenue margin improved to 9.1 per cent. The shares have risen from 59 cents on January 3 to trade at $1.185 on June 6.

We believe the share price has risen too rapidly and is trading at a premium. We're also concerned about inflationary pressures in the US impacting consumer spending. Investors may want to consider taking a profit at these levels.

That strikes a starkly different tone from the positive broker opinion we covered back in April. At the time, we went through the bullish views of ASX broker UBS. UBS maintained a buy rating on the Zip share price following its April quarterly results. That was alongside a 12-month share price target of $1.55.

Only time will tell which of these two ASX experts is on the money regarding this BNPL stock. They can't both be right.

Motley Fool contributor Sebastian Bowen 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 Zip Co. 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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