The Zip Co Ltd (ASX: ZIP) share price is $2.88, down 3% on Friday and down 30% over the past month.
The buy now, pay later (BNPL) stock has had a lacklustre first half in FY26 after a rip-snorting period of growth, rising 110% in FY25.
Zip shares maintained momentum in early FY26, but began falling after the company released its 1Q FY26 results on 20 October.
The Zip share price fell 12.4% in October despite a strong first-quarter update, including upgraded FY26 transaction volume guidance.
Zip reported record cash earnings of $62.8 million, up 98.1% year on year, reflecting an operating margin of 19.5%.
The US segment delivered year-on-year TTV and revenue growth of 47.2% and 51.2% respectively.
The ANZ business achieved double-digit TTV growth.
What's behind the 30% Zip share price dive?
Blackwattle Investment Partners said Zip was among the worst performers in its Small Cap Quality Fund last month.
Portfolio managers, Robert Hawkesford and Daniel Broeren, said the Zip share price fell due to worries about US credit quality.
This followed the collapse of sub-prime auto lender, Tricolor, amid fraud allegations; the bankruptcy of auto parts supplier, First Brands; and an increase in Zip's bad debts in the US.
In their latest update, the managers said:
While the direction of bad debts is negative, we highlight it has only reached the bottom end of Zip's bad debt target range, and an increase is expected with strong transaction volume growth.
While negative sentiment is pulling the Zip share price down, the managers said the underlying fundamentals of the business are strong.
… the underlying fundamentals and outlook for Zip remain strong and we see meaningful upside from both a re-rating of the stock and the ongoing penetration of BNPL products in the US which has a significant runway, sitting at only ~2% today, vs ~15% and ~20% in Australia and Europe respectively.
At the annual general meeting on 6 November, management said the company remained on track to deliver its upgraded FY26 guidance.
In a speech, Group CEO and managing director Cynthia Scott said:
We remain on track for our FY26 results to all be within target ranges as previously announced to the market in August and will report on progress at our first half results in February.
Scott said Zip had three strategic priorities for FY26: growth and engagement, product innovation, and platforms for scale.
The decline in the Zip share price presents a buy-the-dip opportunity, according to some experts.
Macquarie recently began covering Zip shares with a buy rating and a 12-month price target of $4.85.
